INCOME STATEMENT

The income statement (or Profit-and-Loss, as it may also be called) shows the association’s income (revenue) and expenses for a given period, usually a month. Income statements should also include columns for year-to-date income and expenses, to give the reader a more complete picture of activity for each line item for the whole year up to the date of the financial statements. The best income statements also include budget columns for the month, and for the year-to-date, for each income and expense item. Comparing revenue and expenses to budgeted figures is a sound way to measure the association’s actual performance and contrast it to the revenue and expenses that the association anticipated to realize. It is also an excellent way to identify if there are abnormalities or errors in some of the figures.

CHECK REGISTER

The check register or cash disbursements report lists all checks that were issued during the month. This tracks the physical payments to vendors that were made in a given period. Keep in mind that if the association utilizes online payments or automatic withdrawal, it is possible that these payments may not be included on the check register, unless they were recorded as manual checks. Some payments may have been recorded via a journal entry. In order to identify whether all cash disbursements are included on the report, you will need to review the cash account(s) in the monthly general ledger report. Boards would do well to review the check register each month to identify any unusual vendors or amounts.

ACCOUNTS RECEIVABLE

The accounts receivable report should list all owners and their respective balances as of the end of the month. Some monthly financial statement packages include receivable reports that only include delinquent accounts, or owners that have a receivable balance due to the association. While there is nothing wrong with that, if an association chooses this way to report its receivable balances, it may also want to consider including a report that shows the owners who have a credit or prepaid assessments balance, and zero balances due, in order to show a more complete population. Management and the board should review the receivable report regularly in order to identify accounts that are becoming significantly delinquent in order to take the proper actions for collection. Receivable reports that include an aging feature (distinguishing accounts that are 30 days old, 60 days old, 90 days old, etc.) are most conducive in identifying the “problem child” accounts.

Another helpful receivable-related report that is recommended to be included is an owner activity report or other report that shows the assessment charges and other charges per unit for the month, the respective payments made by each unit for the month, and any other account adjustments such as waived fees, corrections, or write-offs.

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With this latter report, each unit can be reviewed to ensure that all assessments and charges were being applied appropriately.

ACCOUNTS PAYABLE

As referenced earlier, this type of report is usually only included in the financial statements of associations that utilize the full accrual method of accounting. When an association tracks its liabilities, invoices that have been received from vendors but are not physically paid yet are included in the accounts payable report. This informs the reader of bills that the association owes to its vendors as of the date of the financial statements, and future payments that will need to be made.

DETAILED GENERAL LEDGER REPORT

The detailed general ledger report shows the activity that was posted to all accounts during the period, whether they were deposits, disbursements, assessment or other charges, payroll, journal entries, voided checks, waived fees to owners’ accounts, or other transactions. If you are curious to see all of the transactions that were posted to the cash accounts, for example, refer to the general ledger report. If an expense account has a balance that seems odd compared to budget or other facts that you know about that type of expenditure, refer to the general ledger report to see the detail that makes up the balance.

For example, if your association’s financial statements are on the accrual basis of accounting, and if you have a regular monthly interior hallway cleaning service, you should expect to see a recurring expense for this cleaning. If one month does not show an amount for cleaning expense, it may be possible that the association has not received or paid the bill yet, or possibly that the expense was misclassified into another expense account. In order to determine what the cause may be, you’ll want to peruse the check register to see if the cleaning vendor was issued a check in the current month, or analyze the monthly general ledger report to see if the cleaning invoice was erroneously posted to an expense account other than the regular cleaning expense.

There are other types of reports that can be included in the monthly financial statement package, but the ones discussed here are the basics that present the most commonly needed information. If there is an additional report or some additional information that you would like to see in your monthly financial statements, discuss it with your management company or accountant. The more financial information you have, and the more you understand it, the better armed you can be to achieve financial “victory” (worth 15 points in Scrabble, without any bonus tiles).

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