January is the time of year that Florida Condominium and Homeowners Associations must begin to produce a year-end financial report as required by Florida Statutes. The report is due 120 days after the end of the fiscal year or on an annual basis as provided in the association bylaws. Which type of report your board must produce depends on annual revenues and/or the number of units in the association. Associations must use an independent certified public accountant, or CPA, to prepare the report. That means the CPA firm compiling, reviewing, or auditing the association’s financial statements must be a separate entity from the person or firm who prepares those statements every month.
What Type of Report is Required?
The type of annual financial report to be produced depends on the association’s annual revenues:
- Associations with total annual revenues under $150,000, or who have 50 or fewer units regardless of revenues, are required to prepare a report of cash receipts and expenditures for the classifications set out in the Statute. Additional relevant classifications may be added by the association’s members.
- Associations with total annual revenues of at least $150,000 but less than $300,000 must prepare compiled financial statements.
- Associations with total annual revenues of at least $300,000 but less than $500,000 must prepare reviewed financial statements.
- Audited financial statements are required for associations with total annual revenues of $500,000 or higher.
It is possible for an association to prepare a report less than what is required by statute, but only if a majority of the voting interests elect to do so. That election to waive the reporting requirement must occur prior to the end of the year and is effective only for the fiscal year in which the vote is taken. Associations wishing to implement this in their Association should consult the Association’s attorney.
CPA Levels of Service
As mentioned above, depending on the association’s total revenues, the type of report a CPA prepares will vary.
- A compilation is the most basic report. The CPA reviews the association’s financials and checks for obvious errors. This “no assurances” report means the CPA did not check that the financials reviewed were accurate.
- Reviewed financial statements include the same information a compilation does but have more analysis of the records. The report comes with “limited assurance” from the CPA which simply means the financial records aren’t missing anything material.
- A full audit covers everything including substantiation and verification, with the CPA personally verifying all figures with debtors and creditors. They also physically inspect the condominium and homeowners association’s documents and review all contracts and board minutes. A full audit report comes with “positive assurances” which means the CPA who conducted the analysis and prepared the report guarantees its accuracy.
Selecting an Association CPA
If your association is in the process of hiring a CPA, here are some tips to ensure you find someone who helps you meet statutory requirements.
- Interview several firms and ask about their familiarity with Florida’s Association statutes.
- Look for firms that specialize in preparing Association financial reports. There is a big difference between CPA firms that work with individuals or small businesses and those who understand association regulations.
- Ask for references from other local Associations.
- Ask for a copy of their certification with the State of Florida and a copy of their insurance.
As a Board Member for your association, it’s part of your job to know and understand the reporting requirements under Florida Statutes. To make the best possible decisions related to the governance of your community, it’s also important to understand the services a CPA firm provides. The more you know, the better you’ll be able to find a CPA who provides you with the quality, timely service your association needs.