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Year End Accounting: Loose Ends
Some areas to consider include:
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.
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.
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.
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.
Ensure the correct loan balance is presented on your financial statements. Compare to the loan statement provided by lenders.
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.
Compare actuals to budget. Inquire about unexpected variances. Ensure all current year expenses have been recorded.
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