CT August 2026

MANAGEMENT TRENDS

Understanding Community Association Financials By Ray Barnes CMCA, AMS, PCAM, Taylor Management Company, AAMC, AMO

U nderstanding financial statements is essential for any community association. These documents show where the money is coming from, where it is spent, and whether the association is financially healthy. Every community association deals with money. It’s impossible to run an association without funding. These associations collect fees and fines from homeowners, pay vendors for their services and plan budgets for the year. Many also maintain reserves. Therefore, accurate financial reporting is critical for both transparency and governance. To keep track of all this money, they must prepare and maintain accurate financial statements. These financial statements are formal reports that summarize the financial activities and position of the association. Their main purpose is to maintain financial transparency. These statements keep both board members and home owners informed about the association’s financial standing. By reviewing these statements regularly, the board can prevent mismanagement and fraudulent activity. The board can also ensure that the community stays within budget. Furthermore, these financial statements are essential for the board to make sound decisions about finances. For homeowners, the financial statements provide insight into the association’s financial performance and help hold the board accountable. These statements can signal good or bad financial performance. It’s a way for homeowners to keep board members in check. Several financial statements play a critical role in HOA financial management. That said, here are the most important homeowner and condo association financial statements. The Balance Sheet provides a snapshot of the com munities’ financial condition at a given point in time. It lists the association’s assets (such as bank accounts, reserve funds, or receivables), liabilities (including unpaid invoices or loans), and fund balances. As its name suggests, the

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“Every community association deals with money. It’s impossible to run an association without funding.”

balance sheet should always be balanced according to this equation: Assets equals Liabilities plus Equity. One of the most essential financial statements is the Income Statement. Also known as the Profit and Loss statement, this report tracks the association’s income and expenses over a defined period. In this statement, board members will find a breakdown of the revenue sources, including dues and maintenance fees. The report compares this revenue with the association’s actual expenses, such as landscaping, maintenance, insurance, and management fees. The income statement deducts the total expenses from the total revenue to arrive at a net profit or net loss. This is where board members can see if there is overspending or if there are budget shortfalls. Based on this report, boards can make financial adjustments including cost cutting, increasing dues or considering special assessments. The Cash Flow Statement tracks how money moves in and out of the association. It categorizes transactions into: operating activities, investing activities, and financing CONTINUES ON PAGE 54

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AUGUST 2026