condominium financial reporting

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Condominium Financial Reporting

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What is a year-end financial report?What is a year-end financial report?

The condominium act requires every The condominium act requires every condominium association to prepare a condominium association to prepare a year-end summary of the financial year-end summary of the financial activities and financial position of the activities and financial position of the association. association.

718.111(13), F.S.718.111(13), F.S.

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Financial ReportingFinancial Reporting

The report covers the associations prior The report covers the associations prior fiscal year. This may be a calendar year, fiscal year. This may be a calendar year, January 1 to December 31, or it may be January 1 to December 31, or it may be some other fiscal period, like October 1, to some other fiscal period, like October 1, to September 30.September 30.

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Within 90 days after the end of the fiscal year, or Within 90 days after the end of the fiscal year, or annually on a date provided in the bylaws, the annually on a date provided in the bylaws, the association shall prepare and complete, or association shall prepare and complete, or contract for the preparation and completion of a contract for the preparation and completion of a financial report for the preceding fiscal year.financial report for the preceding fiscal year.

718.111(13), F.S.718.111(13), F.S.

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Within 21 days after the final financial report is completed Within 21 days after the final financial report is completed by the association or received from the third party, but by the association or received from the third party, but not later than 120 days after the end of the fiscal year or not later than 120 days after the end of the fiscal year or other date as provided in the bylaws, the association other date as provided in the bylaws, the association shall mail to each unit ownershall mail to each unit owner at the address last at the address last furnished to the association by the unit owner, furnished to the association by the unit owner, or hand or hand deliver to each unit ownerdeliver to each unit owner, , a copy of the financial a copy of the financial report or a noticereport or a notice that a copy of the financial report that a copy of the financial report will be mailed or hand delivered to the unit owner, will be mailed or hand delivered to the unit owner, without charge, upon receipt of a written request without charge, upon receipt of a written request from the unit owner. from the unit owner.

718.111(13), F.S.718.111(13), F.S.

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Types of Financial ReportsTypes of Financial Reports

There are 2 types of Financial Reports.There are 2 types of Financial Reports.A.A. Report of Cash Receipts and DisbursementsReport of Cash Receipts and Disbursements

B.B. Financial Statements – 3 levels:Financial Statements – 3 levels:

1)1) Compiled Financial StatementsCompiled Financial Statements

2)2) Reviewed Financial StatementsReviewed Financial Statements

3)3) Audited Financial StatementsAudited Financial Statements

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Who Prepares What?Who Prepares What?

A.A. Report of Cash Receipts and Disbursements - Report of Cash Receipts and Disbursements - Associations comprised of Associations comprised of fewer than 75fewer than 75 unitsunits or less or less than $100,000 in annual revenues.than $100,000 in annual revenues.

B.B. Financial Statements - Associations comprised of 75 or Financial Statements - Associations comprised of 75 or more units more units ANDAND $100,000 or more in annual $100,000 or more in annual revenues and associations whose documents require revenues and associations whose documents require financial statements.financial statements.

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What are Annual Revenues?What are Annual Revenues?

Annual revenues include but are not limited to the Annual revenues include but are not limited to the following:following:

• Member Assessments, (Regular and Special);Member Assessments, (Regular and Special);• Interest;Interest;• Income, (Rental, Laundry, Ancillary Operations, Etc.); Income, (Rental, Laundry, Ancillary Operations, Etc.); • Insurance proceeds;Insurance proceeds;• Fees and Fines Collected.Fees and Fines Collected.

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Report of Cash Receipts and Report of Cash Receipts and DisbursementsDisbursements

This is a report of the prior years financial activities This is a report of the prior years financial activities prepared on a cash basis.prepared on a cash basis.

• Cash basis - Reporting of receipts and Cash basis - Reporting of receipts and expenditures as they actually occurred. This expenditures as they actually occurred. This is similar to your check book, in that it shows is similar to your check book, in that it shows cash coming in, (deposits) and cash going cash coming in, (deposits) and cash going out (expenses). out (expenses).

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Report of Cash Receipts and Report of Cash Receipts and Disbursements DisclosuresDisbursements Disclosures

Revenues must include, if applicable:Revenues must include, if applicable:• Assessments;Assessments;• Special Assessments;Special Assessments;• Interest;Interest;• Insurance proceeds;Insurance proceeds;• Any other form of income.Any other form of income.

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Report of Cash Receipts & Disbursement Report of Cash Receipts & Disbursement Disclosures continued…Disclosures continued…

Expenses must include if applicable:Expenses must include if applicable:• Costs for security; Costs for security; • Professional and management fees and expenses; Professional and management fees and expenses; • Taxes; Taxes; • Costs for recreation facilities; Costs for recreation facilities; • Refuse collection; Refuse collection; • Utility services; Utility services; • Lawn care; Lawn care; • Building maintenance and repair; Building maintenance and repair; • Insurance costs; Insurance costs; • Administration and salary expenses. Administration and salary expenses.

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Report of Cash Receipts & Disbursement Report of Cash Receipts & Disbursement DisclosuresDisclosures continued…continued…

The following reserve disclosures shall be made regardless The following reserve disclosures shall be made regardless of whether reserves have been waived for the fiscal of whether reserves have been waived for the fiscal period covered by the financial report:period covered by the financial report:

• The beginning balance in each reserve account;The beginning balance in each reserve account;• The amount of assessments and additions to each The amount of assessments and additions to each

reserve account;reserve account;• The amount expended or removed from each reserve The amount expended or removed from each reserve

account;account;• The ending balance in each reserve account;The ending balance in each reserve account;• The amount of annual funding required to fully fund The amount of annual funding required to fully fund

each reserve;each reserve;

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Report of Cash Receipts & Disbursement Report of Cash Receipts & Disbursement Disclosures continued…Disclosures continued…

• The manner by which reserve items were estimated; The manner by which reserve items were estimated; • The date the estimates were last made; The date the estimates were last made; • The association’s policies for allocating reserve fund The association’s policies for allocating reserve fund

interest;interest;• Whether reserves have been waived for the period;Whether reserves have been waived for the period;• The specific purpose or purposes of any special The specific purpose or purposes of any special

assessments to unit owners and the amount of each assessments to unit owners and the amount of each special assessment and the disposition of the funds special assessment and the disposition of the funds collected.collected.

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Financial StatementsFinancial Statements

This is a report of the prior years financial activities This is a report of the prior years financial activities prepared on the accrual basis using fund prepared on the accrual basis using fund accounting in accordance with generally accounting in accordance with generally accepted accounting principles, (GAAP).accepted accounting principles, (GAAP).

• Accrual basis - Reporting of receipts and Accrual basis - Reporting of receipts and expenditures as they were earned or obligated.expenditures as they were earned or obligated.

• GAAP - financial accounting and reporting GAAP - financial accounting and reporting assumptions, standards, and practices that a assumptions, standards, and practices that a business firm must use in preparing external financial business firm must use in preparing external financial statements.statements.

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Financial StatementsFinancial Statements

There are three levels of financial statements. There are three levels of financial statements. They are as follows:They are as follows:

• AuditAudit – Seventy-five or more units and annual – Seventy-five or more units and annual revenues of $400,000 and above;revenues of $400,000 and above;

• ReviewReview – Seventy-five or more units and annual – Seventy-five or more units and annual revenues of at least $200,000 but less than $400,000;revenues of at least $200,000 but less than $400,000;

• CompilationCompilation – Seventy-five or more units and annual – Seventy-five or more units and annual revenues of at least $100,000 but less than $200,000.revenues of at least $100,000 but less than $200,000.

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AuditAudit

Performed by a Florida Licensed CPA.Performed by a Florida Licensed CPA.

Examination of original source documents.Examination of original source documents.

Independent verification of balance sheet Independent verification of balance sheet accounts.accounts.

Performance of substantive tests.Performance of substantive tests.

Independent assurance that statements are in Independent assurance that statements are in accordance with GAAP.accordance with GAAP.

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ReviewReview

Performed by a Florida Licensed CPA.Performed by a Florida Licensed CPA.

Some analytical procedures and inquiries.Some analytical procedures and inquiries.

Limited assurance that statements are accurate.Limited assurance that statements are accurate.

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CompilationCompilation

Florida Licensed CPA not required.Florida Licensed CPA not required.

Production of statements from association Production of statements from association records.records.

No assurance of the accuracy of the statements.No assurance of the accuracy of the statements.

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Financial Statement ComponentsFinancial Statement Components

The financial statements must contain the following The financial statements must contain the following components:components:

• Accountant’s or Auditor’s Report;Accountant’s or Auditor’s Report;• Balance Sheet;Balance Sheet;• Statement of Revenues and Expenses;Statement of Revenues and Expenses;• Statement of Changes in Fund Balances;Statement of Changes in Fund Balances;• Statement of Cash Flows;Statement of Cash Flows;• Notes to Financial Statements;Notes to Financial Statements;• Reserve Disclosure.Reserve Disclosure.

61B-22.006(2), F.A.C.61B-22.006(2), F.A.C.

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Year-end DisclosureYear-end Disclosure

For each reserve account:

• Beginning balance;• Additions;• Deductions;• Ending balance;• The amount required to fully fund each item (This

does not apply when using the pooled method);• The manner by which reserve items were estimated,

the date the estimates were last made, and whether reserves have been waived for the period covered by the financial statements.

61B-22.006(3)(a), F.A.C.

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Year-end Disclosure continued…Year-end Disclosure continued…

Statement of policy regarding the allocation of Statement of policy regarding the allocation of reserve fund interest:reserve fund interest:

• Distributed equally among reserve Distributed equally among reserve accounts;accounts;

• All interest assigned to one reserve All interest assigned to one reserve account;account;

• Allocated proportionately among Allocated proportionately among reserve accounts;reserve accounts;

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Year-end Disclosure continued…Year-end Disclosure continued…

• The method by which income and expenses were The method by which income and expenses were allocated to the unit owners;allocated to the unit owners;

• The specific purpose or purposes of any special The specific purpose or purposes of any special assessments to unit owners and the amount of each assessments to unit owners and the amount of each special assessment and the disposition of the funds special assessment and the disposition of the funds collected;collected;

• The amount of revenues and expenses related to The amount of revenues and expenses related to limited common elements shall be disclosed when the limited common elements shall be disclosed when the association maintains the limited common elements association maintains the limited common elements and the expense is apportioned to those unit owners and the expense is apportioned to those unit owners entitled to the exclusive use of the limited common entitled to the exclusive use of the limited common elements.elements.

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Year-end Disclosure, continued…Year-end Disclosure, continued…

Multicondominium associations disclosures: Multicondominium associations disclosures: • Multicondominium associations may present the financial Multicondominium associations may present the financial

statements on a combined basis as long as the financial statements on a combined basis as long as the financial statements, notes, or supplementary information disclose the statements, notes, or supplementary information disclose the revenues, expenses, and changes in fund balance for each revenues, expenses, and changes in fund balance for each condominium, and the association, as applicable.condominium, and the association, as applicable.

• The financial statements, notes, or supplementary information The financial statements, notes, or supplementary information shall also disclose the revenues and expenses of the shall also disclose the revenues and expenses of the association that are not directly associated with specified association that are not directly associated with specified condominiums, and the method used to allocate such condominiums, and the method used to allocate such expenses to the condominiums or units, as applicable.expenses to the condominiums or units, as applicable.

• The reserve disclosures required by this rule shall be The reserve disclosures required by this rule shall be presented separately for each condominium and for any presented separately for each condominium and for any association reserves not specifically identified with individual association reserves not specifically identified with individual condominiums. condominiums.

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GAAP and GAASGAAP and GAAS

GAAPGAAP - financial accounting and reporting - financial accounting and reporting assumptions, standards, and practices that a assumptions, standards, and practices that a business firm must use in preparing external business firm must use in preparing external financial statements.financial statements.

GAASGAAS - auditing standards established by the - auditing standards established by the American Institute of Certified Public American Institute of Certified Public Accountants.Accountants.

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Providing a Lower Level of Year-end Providing a Lower Level of Year-end ReportReport

Majority vote of the voting interests present or by Majority vote of the voting interests present or by limited proxy at a properly called meeting of the limited proxy at a properly called meeting of the association.association.

Must be taken before the end of the fiscal year.Must be taken before the end of the fiscal year.

Applies to the current fiscal year, except the Applies to the current fiscal year, except the approval may also be effective for the following approval may also be effective for the following fiscal year.fiscal year.

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Providing a Lower Level of Year-end Providing a Lower Level of Year-end Report continued… Report continued…

Financial reporting requirement may not be waived for Financial reporting requirement may not be waived for more than 3 consecutive years. more than 3 consecutive years.

Developer may cast His/Her votes only for the first 2 Developer may cast His/Her votes only for the first 2 fiscal years. fiscal years.

Any audit or review prepared prior to turnover of control Any audit or review prepared prior to turnover of control of the association shall be paid for by the developer. of the association shall be paid for by the developer.

AN ASSOCIATION CANNOT WAIVE THE AN ASSOCIATION CANNOT WAIVE THE REQUIREMENT TO REQUIREMENT TO

PREPARE THE YEAR-END FINANCIAL REPORT.PREPARE THE YEAR-END FINANCIAL REPORT.

718.111(13)(d)3., F.S718.111(13)(d)3., F.S..

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Sample Limited ProxySample Limited Proxy

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Customer Contact CenterCustomer Contact Center• For additional information concerning the For additional information concerning the

Condominium or Cooperative Acts and to Condominium or Cooperative Acts and to request copies of educational materials available request copies of educational materials available to condominium and cooperative unit owners you to condominium and cooperative unit owners you may contact the Department’s Customer Contact may contact the Department’s Customer Contact Center at Center at Center at Center at 1-800-226-91011-800-226-9101 (Florida (Florida Only) or Only) or 850-488-1122.850-488-1122.

• You may also e-mail the Department at You may also e-mail the Department at • [email protected]@dbpr.state.fl.us

• Statutes and other information concerning the Statutes and other information concerning the division are available on the World Wide Web atdivision are available on the World Wide Web atwww.myfloridalicense.com/dbpr/lsc/index.htmlwww.myfloridalicense.com/dbpr/lsc/index.html

condominium financial reporting

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