What Every Board Member Should Know About Financial Reports
Want to learn more about how to read your monthly financial reports? Save the evening of June 23, 2020 in your calendar for Wilson Blanchard’s upcoming Financial Statement webinar – more details will be sent in the coming week.
Managing and overseeing a condominium corporation’s finances is one of the Boards most important responsibilities. To successfully fulfill this duty and sustain the financial well-being of your community, you must understand financial reports and their importance to the success of your condo. Read on to learn what to look for when reviewing your financial reports.
What’s a financial report?
A condos financial report consists of the key economic information that will help board members manage operations and make good decisions. The monthly financial report will include a Balance Sheet, Income Statements for both your Operating and Reserve Fund, and a number of supporting schedules – reports containing details that support the amounts on the Balance Sheet and Income Statements.
Examples of supporting schedules may include:
- Bank Statements and Reconciliations
- Accounts Receivable Report
- Accounts Payable Report
- General Ledger
Who prepares the financial report?
At Wilson Blanchard, each client has a dedicated Accounting Administrator assigned to their community. Your assigned Accounting Administrator works closely with your Condominium Manager on the day-to-day financial operations of your corporation and prepares the Financial Statements for your condo. Your Condominium Manager will then review and approve these Financial Statements prior to sending the reports to the Board.
When do we receive the financial reports?
Financial reports are prepared monthly, typically by the 10th business day of the following month after all amounts received have been recorded. At year-end, this timing is delayed as a result of additional audit requirements that must be met. It’s very important to monitor financials consistently on a monthly basis, as they indicate the financial health of your community and assist in ongoing decision making.
What should I look for in the financial report?
Because condominium corporations are not-for-profit entities, the review of financial reports is somewhat different than most businesses who focus mainly on “the bottom line” – profit or loss. The following are some of the things you should look for to ensure your corporation is in good financial standing:
- How healthy is the corporations cash flow – in short, does the corporation have enough money in the bank to pay its bills?
- Is the Reserve Fund fully funded – are you following the requirements of your Form 15 (Notice of Future Funding)?
- What position is the Operating Fund in? While the corporation certainly should not be operating in a deficit position, the surplus should also not be excessive.
Additional details from the supporting schedules should also be reviewed, such as whether any investments are coming due, the status of unit owner arrears and a review of budget variances. Specific items will vary from corporation to corporation – for example, your condo may or may not have investments – so each situation will be somewhat unique.
Who can access the financial reports?
Due to the sensitive and personal data that can be included in the reports (unit owner arrears as an example), Boards should not share the full monthly financial package that they receive with homeowners. The balance sheet and income statements are usually appropriate for all homeowners to see, however in general supporting schedules should not be shared. At the very least, these schedules must be redacted to remove sensitive and personal information before being viewed by any non-Board member.
While financial reports may seem long and cumbersome, it’s important they’re thoroughly reviewed on a monthly basis. Doing this will ensure you’re fulfilling your fiduciary duty and protecting your corporation, while helping you make sound decisions during Board meetings to prepare your community for a strong future.
Originally published in the Q1-2020 edition of the WB Condo Connection…