report at every annual general meeting .
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Prepare a long-term operating budget covering the next three to five years .
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Include reasonable reserves for future major repairs and replacement of common facilities .
Disclosure
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Provide home owners with reasonably detailed summaries of budget and reserve information on an annual basis , with further information readily available .
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Request financial statements from the manager or accountant at least quarterly .
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Inform home owners when the annual financial statement , which must be prepared in accordance with the basis of accounting used by the association , is available for review .
Policies / Record keeping
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Develop a written , legal , board-approved collection policy for enforcing owners ’ levy obligations .
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Establish that the board must approve all write-offs of bad debts in a timely manner .
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Solicit competitive bids for services , and require board authorisation for all expenditures over a predetermined amount .
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Request timely updates and reports from the association ’ s manager and accountant .
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Keep detailed meeting minutes , paying close attention to all fiscal matters .
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Conduct payroll audits to ensure all employees are legitimate , and paperwork is current and complete .
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Carefully archive all permanent financial records .
Budgeting
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Assign budget items in the month during which the expenses are expected to be incurred rather than dividing total yearly expenses by 12 .
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Require board approval for cheques in payment of non-budgeted , non-recurring expenses in excess of an established limit .
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Compare income statement with the budget on a periodic basis ( at least quarterly ).
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Require board approval for capital expenditure and big contracts – see bid requests , below .
Bid requests and requests for proposals
Management of a community association ’ s resources frequently involves the use of contracts to obtain the products and services required . Given such , one component of the board ’ s fiduciary responsibility is to ascertain that the association is not paying too much for the products and services it receives . The most effective way to ensure competitive prices is through bid requests to potential contractors . A bid request or request for proposal ( RFP ) is an announcement that an organisation is interested in receiving proposals for a particular project or service .
Because of the amount of effort the bidding process requires for both the community association and the bidders , the process should be used only for significant projects or purchases , and for ongoing services such as lawn maintenance . The board of directors should determine the minimum size of a contract that requires competitive bidding . Simply stated , bid requests and RFPs allow the board to solicit competitive prices for products and services , thereby ensuring that the community association obtains the desired services from a quality service provider at a reasonable price .
Financial responsibilities
A community association ’ s governing documents and management contracts will define formal roles and responsibilities in the budget process . These roles should be communicated in a constructive manner to all involved to ensure that appropriate expectations exist . Below is an outline of the responsibilities of volunteers and professional staff typically charged with developing community association budgets :
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The board of directors is responsible for establishing , approving and monitoring the community ’ s budget .
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The treasurer or finance director is usually responsible for the preparation and review of the draft budget . He or she typically delegates the initial preparation of the budget to the manager or accountant . If applicable , the treasurer will then review the draft of the budget with the association ’ s finance committee .
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Owners should be aware of how the association ’ s finances are being run , and they may need to vote on some things , e . g . a large increase in levies , special levies , capital expenditure improvements or funding reserves . Some associations require that owners vote on budgets .
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The manager ’ s formal budget responsibilities are listed in the management contract , but they will usually include : »» preparing a draft budget
»» reviewing the draft with the treasurer , finance committee ( if one exists ), and the board
»» revising the draft budget after changes are made
»» mailing a summary of the proposed budget to owners prior to approval
»» mailing copies of the completed budget to all owners and having copies on hand for prospective owners .
Accounting practices and financial statements
There are two commonly used bases of accounting – the accrual basis of accounting , which is required by generally accepted accounting principles ( GAAP ), and the cash basis of accounting , which is considered to be an other comprehensive basis of accounting ( OCBOA ). OCBOA is not in accordance with GAAP , which is most often used by community associations .
Generally accepted accounting principles
GAAP accounting provides uniformity among financial statements from different community associations . GAAP requires the use of accrual accounting for annual reports , because it records income when earned and expenses when
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