Special Assessment Accounting. Aware. Diligent. Timely. Accurate. Complete.

Special Assessment Accounting. Aware. Diligent. Timely. Accurate. Complete.

[ Blog/News ]

Special Assessment Accounting. Aware. Diligent. Timely. Accurate. Complete.

Record keeping and accounting for special assessments should not be as challenging as it often is. Often, as auditors we find the accounting for special assessments is incomplete due primarily to changes of management companies, inadequate tracking of owners’ accounts and payments, accounting for special assessment receipts in the wrong fund, and/or special assessment forecasts are inadequate to determine if there will be sufficient funds to pay for all repairs or pay off a loan.
Assessment Records

We recommend a permanent file of special assessment documents, including:

  • Special Assessment notices to owners
  • Board minutes including documentation of special assessments:
    • Initial levy and approval by members
    • Monthly status
      • Amounts assessed to owners
      • Review owner special assessment amortization schedules
      • Amounts spent for the special assessment purpose
      • Financial status
        • Special assessment cash held
        • Special assessments receivable (billed but not received)
        • Remaining amounts to assess
        • Amounts spent to date
        • Projected remaining expenditure
        • Projected remaining debt service: principal and interest
        • Projected surplus or deficit
      • Conclusion regarding financial status

The information and data recommended above are critical. However, only accurate and complete record-keeping and accounting will provide a board with the data needed to understand the status of a special assessment project and the projected financial picture.

Accounting and Banking

Associations should account for special assessment activity in a separate fund from operating and reserves. A separate bank account and specific account codes should be used. An amortization schedule should be maintained for all owners who are making monthly special assessment payments. Special assessment billing and expenditures should be processed using the special assessment bank account and accounting fund. Any amounts received or paid by other funds should be reconciled and repaid to the other funds at least monthly.

Board Meeting Review

At every board meeting, boards should review the vital data systematically. We recommend that board members review special assessment reports and supporting documents and ask questions before meetings. Keep your eyes on the goals: Collection of all assessments, control over expenditures including debt service, and determining the projected surplus or deficit. Boards need to formulate a plan should there be a projected shortfall. Another special assessment? Increase the loan? Hold off on expenditures?

Boards need to actively participate in the management and accounting for all special assessments. End Of Article

By Newman CPA

By Newman CPA

Chapter Happenings Sponsor, February 2021

By: Jeremy Newman CPA, Newman Certified Public Accountant PC

Newman CPA simplifies the HOA CPA process. Our streamlined process enables us to complete your work accurately, efficiently and on time. We understand your need for reliable communication and on-time reporting. We believe that you deserve hassle-free audit & tax services. Have confidence knowing we are your responsive partner here to make your life easier.

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Year End Accounting: Loose Ends

Year End Accounting: Loose Ends

[ Blog/News ]

Year End Accounting: Loose Ends

For most associations, their fiscal year ends on December 31. If an association does not obtain an independent audit by a Certified Public Accountant, it is perhaps more imperative that boards of directors pay close attention to the year-end financial reports.

Some Areas To Consider Include:
Cash

Ensure all bank accounts have been reconciled. Obtain a copy of reconciliations and bank statements and compare, paying attention to unusual or large reconciling items.

Assessments Receivable

Review the aged receivables report. Understand the reasons for delinquent accounts and ensure that a collection plan is in place to maximize recovery of delinquencies.

Accrued Expenses

Most associations account for expenses only when invoices are paid. Boards should ensure they account for all expenses incurred during the year, regardless of when vendors are paid. Remember, you set a budget for the year. It is easy to overlook a late invoice for this year that may be recorded as an expense in the next year.

Special Assessments

Sometimes special assessment programs last more than one year. Often, special assessments are levied to repay a commercial loan. If accounting for special assessments billed, collected, outstanding or delinquent is inaccurate, a board of directors may not be able to determine if the remaining funds to be collected are sufficient to repay a related loan.

Ensure there is a report showing special assessment billing to and receipts from homeowners. Compare the aggregate of special assessment bank account balances plus amounts to be billed and collected less any outstanding special assessment expenditures to the loan repayment requirements, both principal and interest. Early determination of a potential deficit will provide boards with the opportunity to develop a contingency plan.

Loans

Ensure the correct loan balance is presented on your financial statements. Compare to the loan statement provided by lenders.

Income

Review assessments and other income accounts to ensure all income appears to have been recorded. You will need to know if the financials are prepared on accrual or cash basis. Under the accrual basis, assessment income should match budget.

Expenses

Compare actuals to budget. Inquire about unexpected variances. Ensure all current year expenses have been recorded. End Of Article

By Newman CPA

By Newman CPA

Chapter Happenings Sponsor, January 2021

Newman CPA simplifies the HOA CPA process. Our streamlined process enables us to complete your work accurately, efficiently and on time. We understand your need for reliable communication and on-time reporting. We believe that you deserve hassle-free audit & tax services. Have confidence knowing we are your responsive partner here to make your life easier.

By: Jeremy Newman CPA. Newman Certified Public Accountant, PC

  • Pody & McDonald, PLLC - Ad
  • Barker Martin
  • Alliance Association Bank - Ad
  • The Copeland Group - Banner Ad
  • Condominium Law Group, PLLC - General Counsel & Collection Services - Partners Ken Harer & Valerie Oman - Phone: (206) 633-1520 Website: www.condolaw.net
  • Porter Construction Inc - Building With Integrity - www.porterci.com
  • Newman HOA CPA - Banner Ad
  • HUB International NW - HOA And Condo Solutions - Web Ad
  • Rafel Law Group - Banner Ad

Search WSCAI


Search Business Partners Directory


Diamond Sponsors

  • Agynbyte - Logo
  • CIT - Community Association Banking - Logo
  • Newman HOA CPA - Audit & Tax - Logo
  • CAU - Community Association Underwriters - Logo
  • HUB International NW - Logo
  • RW Anderson Services - Logo
  • Columbia Bank - Logo
  • ServPro Of Seattle NW - Logo
  • SageWater - Logo
  • Rafel Law Group PLLC - Logo
  • Association Reserves WA - Logo
  • Superior Cleaning & Restoration - A COIT Service Company - Logo

Chapter Magazine

journal-november-december-2022-pumpkin-pie

Nov/Dec 2022 Issue

Journal Advertising Partners:

  • Newman HOA CPA Audit & Tax
  • Rafel Law Group PLLC - Logo
  • The Copeland Group - Logo
  • Bell-Anderson & Associates - Logo
  • Community Association Underwriters - Logo
  • Ruff Construction - logo
  • Charter Construction - Logo
  • Popular Association Banking
  • Association Reserves WA - Logo
  • SSI Construction
  • Sagewater
  • Pacific Building Envelope, Inc - Logo

  • Ryan Swanson - Jo Flannery - Flannery @ryanlaw.com
  • Pacific Western Bank - Small Ad
  • Association Reserves of Washington - Ad