Transcript Financials are FUN!!

All Things
Financial
(BTW – Financials are
FUN!!)
Presenters:
Gayle Cagianut, Cagianut & Company
Patty Cathcart, Jimenez & Company
We will take questions during each topic
 We need to limit the number of questions
in order to have time to get through
everything
 Keep the questions as general as possible
so that many can relate

◦ We will stay after for specific questions
Go ahead – you can try and stump us.
 Have fun!!

Rules for Today
GAAP
We will address
Tax
We will address
Legal – especially California
Civil Code
Get a legal opinion!

How much time is spent on the Treasurer’s
report each Board meeting?

Does the manager and/or Board really review
the financials before the meeting?

Are “real” financial items discussed or is it
just a routine reading of the balances?

Be honest!!
Financial Matters Matter

10 questions to ask
◦ Is the cash protected by FDIC/US Govt?
 If not FDIC insured, does the Association have an
investment policy?
◦ Does the bank statement & reconciliation agree
with the cash balance on balance sheet?
 Are there old, outstanding items on the recon?
◦ Is there a large AR balance?
 If so, has the Board addressed collection measures?
 Have they consider a bad debt allowance or write-off?
◦ Does assessment income agree with budget?
◦ Is there other unusual income? E.g. settlements,
insurance proceeds, etc.
◦ Are there expenses that are significantly over or
under budget? Are the checks or expenses that are
unusual?
Reading Financial Statements
Balance Sheet
Replacement Fund (Reserves)
 Look to Reserve Study
◦ Percent Funded
◦ Funding Plan
Operating Fund (Members Equity)
 CAI/Industry standards
◦ 1-3 months of operating expenses
◦ Contingencies & Cash Flows
How much $$ is enough??

Categorizing reserve vs. operating
expenses

Use of reserve money for operations

Due Between Funds – documenting
repayment

Borrowing and not repaying
Reserves
vs. Operating
How do I account for a unit that has been
foreclosed on by the Association – as we
wait for the bank?
 How is rent recorded?
 What about the monthly assessment?
 What other accounting and tax issues are
there?

Foreclosed Units

What is the difference between an audit
and a review?

California Civil Code requirements vs.
Governing Documents

Why would you choose to have an audit if
a review is okay?
Audit vs. Review

1120 vs. 1120-H
◦ What are the differences?
◦ When is one better than the other?
◦ What is Revenue Ruling 70-604 and why
should I care?
Tax Options
Your Questions
Anything Else Financial???