What reports are included with the monthly financial statement? - Castle Breckenridge Management

What reports are included with the monthly financial statement?

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What reports are included with the monthly financial statement?

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Homeowner Association fees help to maintain the property of community residents and to improve the overall quality of the surrounding environment. It is important to understand the financial reports of your HOA in order for you to keep track of your contributions and the overall use of HOA money.

Listed below are the basic documents that are included in most HOA financial reports along with an explanation of what each document means.

Balance sheet

The balance sheet in your HOA financial statement is the quickest and easiest way to get a feel for the financial strength of your community association. There are three parts to a balance sheet: assets, liabilities, and equity.

Assets = Liabilities + Equity. This is the basic formula that your HOA balance sheet should follow. It will provide a general snapshot of how well your association is doing financially at a certain point in time whether it be at the end of every month, quarter, or year. It should be included in every official financial statement.

  • Assets – the positive. These are the things your community association owns. They can be cash, current assets, which will be converted to cash within one year, including accounts receivables for assessment payments. Fixed assets are longer-term and include items such as property, equipment, buildings, vehicles and furniture. Fixed assets are expected to last more than one year before they are converted into cash or used up. Buildings, equipment that is not leased, furniture and property are fixed assets. Office supplies are not fixed assets; a golf cart used to get around a community is. Fixed assets will depreciate each year and have their own section on balance sheets, which may be called “Property, Plant and Equipment.”
  • Liabilities – the negative. This will be anything owed by the association such as maintenance fees, improvements, or vendor bills. Anything that costs money will be a liability. Depreciation on community structures, vehicles, or equipment also counts as a liability and should also be added to the HOA balance sheet.
  • Equity – what’s left. Equity is the difference between the value of the assets and the value of the liabilities. To find equity, the formula can be rearranged as Equity = Assets – Liabilities.

If you follow the formula and your equity is positive, good job! Your association is doing well and is bringing in more money than it owes. If equity is negative, it means that you should quickly reevaluate your finances; more money is being spent than is coming in.

Income Statement

The income statement is considered the most important document within the financial statement because it shows the financial direction, whether that be positive or negative, of the community association.

Information Included

There are four items that should be included in an income statement:

  1. Gross profit
  2. Operational expenses
  3. Gains and losses unrelated to operational costs
  4. Net income

Gross profit is all the money that was made over the time period. If you submit financial documents monthly, it should be all the funds raised within that month. That should include any dues, fees, charges, or donations collected.

Operational expenses would be regular fees such as property maintenance, pool cleaning, landscaping, etc. Anything that is a recurring charge necessary to keep the community up and running.

All other one-time expenses would fall under the Gains and Losses category. Because the income statement shows finances over a certain period of time, any extra expenses need to be reported. If the community playground needed new mulch in March, that expense should appear in that month’s income statement, even if it means the association did not make as much money in March on paper.

Net income is the result of taking gross profit and subtracting all expenses for the period. This is the magic number that the entire report is based on. If your report comes out showing a positive net income, then your association did well and you can put some money in the reserves. If your net profit came out negative, then you should take a deeper look into your finances and see where improvements can be made.

Account Receivables

A statement of receivables, or accounts receivable statement, is a document that details the outstanding charges owed to the community association. This can be from sources such as overdue dues, vendor credits, late fees, or any other outstanding source of income. It is essentially a list of every account that still owes the HOA money.

Information Included

These statements should contain all accounts that owe money, along with the grand total of overdue funds. The total will help with budgeting purposes. Knowing how much money is available, if collections are being handled properly, can help with financial planning. The list of all overdue accounts can act as a checklist for anyone working in collections to ensure that no account is missed.

Some associations prefer to go one step further and detail which accounts are 30 days, 60 days, and over 90 days past due. For example, if a homeowner has missed their dues in March, April, and May; they will have money in the 30, 60, and 90-day categories. This way, collections agents will know to put more pressure on collecting the April dues versus following up on another account that is only 30 days behind. Just like with all financial statements, the more detail you provide, the easier it is to plan and manage.

Bank statements

HOA bank statements are just as they sound: a statement from the bank showing all deposits and withdraws from each association account over a certain period of time. The most effective way to prevent fraud within your community association is to keep a close eye on bank statements. Most associations have at least two accounts: an operating account for regular costs of running a community association and a reserve account for setting aside funds for future projects.

Reviewing bank statements on a regular basis is important because it is one of the few financial documents that is not prepared by the association board of directors or the HOA management company. Comparing bank statements with association financial statements is a good way for other HOA members to check the accuracy of financial statements prepared by the manager and/or treasurer.

Information Included

A proper bank statement should include a timeline of all deposits and withdraws into and out of association accounts. Each account should have its own statement. It is important to carefully review every transaction to prevent potential fraud. One of the most common ways fraud is committed is by “borrowing” money from a long-term reserve fund and returning the money after a time; essentially taking out a loan using association funds. This is common because of how hard it is to track. If all funds are accounted for in the long run, nobody would know unless they inspect each individual transaction.

Who Should Review Bank Statements

Only a few people have access to association funds. Usually, it is just the president, treasurer, and/or your property management company if you choose to use one. This leaves a lot of power in the hands of a few. If left unchecked, it could be an opportunity for fraud. It is important that all bank statements be sent to someone other than the member(s) who have the ability to write checks. That way, they can act as an impartial inspector to make sure that nothing is missing within the HOA accounts.

How Often Should Bank Statements Be Checked

Bank statements should be included with all other financial statements prepared at the interval as determined by your HOA whether it be monthly, quarterly, or annually. Ideally, bank statements should be checked as frequently as possible. Some banks offer online banking services that allow for 24/7 access to association account statements.

General Ledger

The foundation of all HOA accounting is the general ledger. Much like your checkbook at home, the HOA general ledger keeps an ongoing record of all transactions made by the community association. All other financial statements such as the balance sheet, income statement, and statement of receivables are created based on the ledger.

Unlike all the other financial statements which are prepared on a monthly, quarterly, or annual basis, the general ledger should be continuously updated. Whenever a transaction is made or received, it needs to be accounted for. At any point in time, you should be able to look at the ledger and see how much money the association currently has in all accounts and where money has moved. If you need to go back and see how much the association spent on landscaping in August three years ago, you should be able to find it in the ledger records.

Information Included

Depending on the system of accounting, your HOA may have several ledgers running at all times. But no matter the approach, ledgers should include all transactions made by the community association in and out. Each account owned by the HOA should also have its own ledger. Most associations have at least an operational account and a reserve account.

Regularly checking bank statements is a good way to double-check the accuracy of the HOA general ledger. Sometimes transactions can accidentally go unreported or, in some cases, fraudulent activity may occur. Whenever you receive statements from the bank, make sure all transactions match up between them and the HOA general ledger.


In conclusion, understanding your HOA’s monthly financial reports gives you more independence and control over the activities of your HOA. You can carefully follow up on payments and expenditures, suggest areas of improvement, and be more involved in decision making. In the end, you are protecting your homeowner association’s funds and serving your fiduciary responsibilities to the highest level.

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