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NEW FINANCIAL REPORTING REQUIREMENTS
July 1, 2006
SUMMER 2006 - NEW FINANCIAL REPORTING REQUIREMENTS FOR
HOA'S
For the year beginning 2005, all homeowner associations
came under new year-end reporting requirements. These
reporting requirements are based on the amount of parcels
contained in the community and the annual revenues. With
this change, Chapter 720 now parallels Chapters 718 and
719, the statutes for condominiums and cooperatives.
The current statute has caused a disruption in the year-end
reporting process, as the CPAs do not have the auditors and
staffs to perform the audits and reviews within the 60 day
reporting requirement. The volume of year-end reporting
work has doubled for the CPAs and this is further
complicated with their regular tax work at this time. Many
associations did not comply with the statutory time limits
as this was out of their control.
The statute also allows associations to require a higher
level of reporting than is necessary. This must be done by
a petition of 20% of the parcels owners and approval of a
majority of the total voting interests of the community
would be required. In addition to the above, if this
higher level of reporting is not provided for in the
association’s budget, the association may either amend its
budget to reflect the higher cost of such reporting or they
may have a special assessment to pay for this. The
statute then allows for the association to provide this
higher level report to be completed within 90 days.
Conversely, in many instances, the membership of the
association is able to have these requirements waived or
lessened by a majority of the total voting interests.
A community association of fewer than 50 parcels,
regardless of the association’s annual revenues, may
prepare a report of cash receipts and expenditures in lieu
of financial statements unless the governing documents
provide otherwise.
This report of cash receipts and expenditures must disclose
the amount of receipts by accounts and receipt
classifications and the amount of expenses by accounts and
expense classifications. The following should be included,
if applicable: costs for security, professional and
management fees and expenses; taxes; costs for recreation
facilities; expenses for refuse collection and utility
services; expenses for lawn care; costs for building
maintenance and repair; insurance costs; administration and
salary expenses; and reserves if maintained by the
association. Below is the statute for your information and
review.
720.303(7) FINANCIAL REPORTING.--The association shall
prepare an annual financial report within 60 days after the
close of the fiscal year. The association shall, within the
time limits set forth in subsection (5), provide each
member with a copy of the annual financial report or a
written notice that a copy of the financial report is
available upon request at no charge to the member.
Financial reports shall be prepared as follows:
(a) An association that meets the criteria of this
paragraph shall prepare or cause to be prepared a complete
set of financial statements in accordance with generally
accepted accounting principles. The financial statements
shall be based upon the association's total annual
revenues, as follows:
1. An association with total annual revenues of $100,000
or more, but less than $200,000, shall prepare compiled
financial statements.
2. An association with total annual revenues of at least
$200,000, but less than $400,000, shall prepare reviewed
financial statements.
3. An association with total annual revenues of $400,000
or more shall prepare audited financial statements.
(b)1. An association with total annual revenues of less
than $100,000 shall prepare a report of cash receipts and
expenditures.
2. An association in a community of fewer than 50 parcels,
regardless of the association's annual revenues, may
prepare a report of cash receipts and expenditures in lieu
of financial statements required by paragraph (a) unless
the governing documents provide otherwise.
3. A report of cash receipts and disbursement must
disclose the amount of receipts by accounts and receipt
classifications and the amount of expenses by accounts and
expense classifications, including, but not limited to, the
following, as applicable: costs for security, professional,
and management fees and expenses; taxes; costs for
recreation facilities; expenses for refuse collection and
utility services; expenses for lawn care; costs for
building maintenance and repair; insurance costs;
administration and salary expenses; and reserves if
maintained by the association.
(c) If 20 percent of the parcel owners petition the board
for a level of financial reporting higher than that
required by this section, the association shall duly notice
and hold a meeting of members within 30 days of receipt of
the petition for the purpose of voting on raising the level
of reporting for that fiscal year. Upon approval of a
majority of the total voting interests of the parcel
owners, the association shall prepare or cause to be
prepared, shall amend the budget or adopt a special
assessment to pay for the financial report regardless of
any provision to the contrary in the governing documents,
and shall provide within 90 days of the meeting or the end
of the fiscal year, whichever occurs later:
1. Compiled, reviewed, or audited financial statements, if
the association is otherwise required to prepare a report
of cash receipts and expenditures;
2. Reviewed or audited financial statements, if the
association is otherwise required to prepare compiled
financial statements; or
3. Audited financial statements if the association is
otherwise required to prepare reviewed financial
statements.
(d) If approved by a majority of the voting interests
present at a properly called meeting of the association, an
association may prepare or cause to be prepared:
1. A report of cash receipts and expenditures in lieu of a
compiled, reviewed, or audited financial statement;
2. A report of cash receipts and expenditures or a
compiled financial statement in lieu of a reviewed or
audited financial statement; or
3. A report of cash receipts and expenditures, a compiled
financial statement, or a reviewed financial statement in
lieu of an audited financial statement.
With this information plan for these new year-end reporting
requirements for 2007.
Copyright 2007© Associated Property Management of the Palm Beaches, Inc.
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