What Are Some Questions to Ask When Reading the Financial Statements?
What Are Some Questions to Ask When Reading the Financial Statements?
Operating Cash
Is there sufficient cash to meet your monthly cash requirements? How many months of operating cash do your board feel comfortable with having on hand? (Note: CAI Guidelines recommend 1 – 3 months of operating expenses).
Is there excess cash sitting in a checking account earning little or no interest? Should you open an operating savings or money market account with the excess?
Does the board review the bank statements and reconciliations at least quarterly? Are there old outstanding checks which need to be researched? (Uncashed checks can be TROUBLE if they are for such items as insurance and taxes)Are there unusual transfers?
Replacement Fund (Reserve) Cash
Are funds properly invested in accordance with your Association’s investment policy? (What? You don’t have an investment policy? Make this a priority!)
Will funds be available for planned replacement fund expenditures?
Are replacement fund expenditures and transfers properly approved and documented in the board meeting minutes?
Are two board members signing all reserve checks??
Assessments Receivable
Does the aging report agree with the financial statements? Is the board taking the proper collection action on delinquent accounts?
At the end of the year, has the Association determined either which accounts to write off the books or set up with an allowance for bad debts?
Revenues
Does the assessment income agree with the budget?
Are all interest, late charges, and violation fees posted in a timely manner in accordance with the Association’s collection policy?
Is miscellaneous income, especially if large enough (e.g. laundry) monitored? (Note: if there is coin or cash involved pay special attention to internal controls)
Expenses
For items that are significantly over or under budget, are explanations provided?
Are bills being paid on a timely basis?
For unusual, non-recurring type of expenses is there a record in the board meeting minutes of approval by the board? For material dollar amount contracts, does the board use a bid process where appropriate?
