Financial Reporting
Financial Reporting
Existing Requirements for Condominiums And
New HOA Requirements Effective October 1, 2004
This is the fifth of several articles that will specifically address laws adopted by the Florida Legislature which were summarized in our July 1, 2004 e-Lawyer.
    In 2004 the legislature decided that HOAs should report their financial status to their members in much the same fashion as is required for condominiums. This edition of e-Lawyer addresses both the existing condominium requirements and the new HOA requirements that will become effective on October 1, 2004.
 
A. What Statutes and Rules Apply:
 
    1. HOAs:
 
    HOAs will be subject to the requirements of newly revised Section 720.303(7).
 
    2. Condominiums:
 
    Condominiums will continue to be subject to Section 718.111(13) and Rule 61B-22.006, Florida Administrative Code.
 
B. When Must Financial Reports Be Completed and Distributed to Members:
 
    1. HOAs
 
    HOAs must complete their annual financial reports within 60 days after the close of their fiscal year. (However see E(1)(a) below if the type of report is changed.)
 
    They must then, within the time limits set forth for review and copying of the official records, provide each member with a copy of the annual financial report or a written notice that a copy of the financial report is available upon request at no charge to the member.
 
    2. Condominiums:

    Condominiums must complete their annual financial reports within 90 days after the end of their fiscal year, or annually on a date provided in their Bylaws.

    Within 21 days after the final financial report is completed or received, but not later than 120 days after the end of the fiscal year or other date as provided in the Bylaws, the Association must mail or hand-deliver a copy of the report to each unit owner or mail or hand-deliver a notice that a copy of the financial report will be mailed or hand-delivered to the unit owner, without charge, upon receipt of the written request from the unit owner.

C. What Type of Reports Must Be Prepared:

    1. For Both HOAs and Condominiums:

    Subject to the right to either increase or decrease the statutory obligations as addressed below, both HOAs and condominiums are required to prepare one of the following reports generally based on the amount of their revenues:

        a. Report of Cash Receipts and Expenditures:

        The following HOAs and condominiums are required to prepare and distribute a 'Report of Cash Receipts and Expenditures (a/k/a 'Report of Cash Receipts and Disbursements'):

            i. Those communities with total annual revenues of less than $100,000; and

            ii. Those associations that control communities of fewer than 50 parcels or units, regardless of the association’s annual revenues. Please note that Section 720.303(7) specially states that this exception is only available to HOAs if their governing documents don’t provide otherwise. Section 718.111(13) is silent at to this issue as it relates to condominiums.

        For both HOAs and condominiums, the reports must disclose the amount of receipts by accounts and receipt classifications and the amount of expenses by accounts and expense classifications, including, but not limited to, the following, as applicable: costs for security, professional, and management fees and expenses; taxes; costs for recreation facilities; expenses for refuse collection and utility services; expenses for lawn care; costs for building maintenance and repair; insurance costs; administration and salary expenses; and reserves if maintained by the association.

        b. Compiled Financial Statements:

        HOAs and condominiums with total revenues of $100,000 or more, but less than $200,000, are required to prepare compiled financial statements.

        c. Reviewed Financial Statements:

        HOAs and condominiums with total annual revenues of at least $200,000, but less than $400,000, are required to prepare reviewed financial statements.

        d. Audited Financial Statements:

        HOAs and condominiums with total annual revenues of $400,000 or more are required to prepare audited financial statements.

D. Technical Requirements for Financial Reports:

    1. HOAs:

    The only technical requirement imposed on HOAs is found in subsection (7)(a) and is stated as follows:

An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles. (Emphasis added.)

    2. Condominiums:

    While Section 718.111 (13) also requires all reports to be prepared in accordance with generally accepted accounting principles, Section 61B-22.006, Florida Administrative Code adds many additional technical requirements for condominiums. While these additional requirements are too numerous to repeat in this article, some of the most important are as follows:

        a. The financial reports must be prepared on the accrual basis using fund accounting in accordance with generally accepted accounting principles.

        b. There are special rules relating to financial reporting for 'Multicondominium Associations'.

        c. There are special rules that apply to developer funding.

E. Power to Either Increase or Reduce the Statutory Obligations:

    1. HOAs:

    Notwithstanding the above requirements, HOAs may chose to either increase or reduce the above imposed statutory obligations as follows:

        a. Procedure Required to Increase the Statutory Obligation:       

        If 20% of the members serve a petition on the board demanding a higher level of financial reporting, the HOA must hold a membership meeting within 30 days for the purpose of voting on such demand for that fiscal year. If at least a majority of the members approves such action, the HOA must amend the budget or adopt a special assessment to pay for the increased financial report regardless of any provision to the contrary in the governing documents, and must then provide the members with such report within 90 days of the meeting or the end of the fiscal year, whichever occurs later.

        b. Procedure Required to Reduce the Statutory Obligation:

        If HOAs wish to reduce the statutory reporting obligation, they may do so upon the approval of at least a majority of the members present at any properly called meeting of the association. At this time it is unknown if this approval will supersede any obligations to the contrary found in the HOAs governing documents.

    2. Condominiums:

    As with HOAs, condominiums may also choose to either increase or reduce the above imposed statutory obligations. For condominiums, however, the process is slightly different as reflected below:

        a. Procedure Required to Increase the Statutory Obligation:

        Section 718.111(13) does not permit the members to insist on an increased financial report. Instead it permits the condominium association board to make that decision without a meeting of or approval of the members.

        b. Procedure Required to Reduce the Statutory Obligation:

        As with HOAs, only the members may vote to reduce the above stated statutory obligations. Again, as with HOAs, such approval must be by at least a majority of the members present at any properly called meeting of the association.

        However, the following two additional requirements exist for condominiums:

        i.     The meeting at which this decision is to be made must occur prior to the end of the fiscal year; and

        ii.     The decision is effective only for the fiscal year in which the vote was taken.

        As with HOAs, it is unknown if this approval will supersede any obligations to the contrary found in the condominium’s governing documents.

        c. Special Requirements During Developer Control Period:

        For the first two fiscal years (beginning with the fiscal year in which the condominium declaration is recorded), both the developer and non-developer unit owners may vote on any matters relating to the preparation of financial reports. From and after that date, only the non-developer unit owners may vote on such issues until control of the Association is turned over to the Association by the developer.

E. Developer Reports:

    In addition to the above addressed financial reports, Section 720.3086, (formerly Section 689.265) requires developers or other non-association owners of common areas or recreational facilities to prepare and either deliver or publish a complete actual financial report relating to that property. This section would apply to those communities that have recreational leases.

The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne and Daytona Beach, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice.

©2004 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached at 407-660-1040.
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