CT August 2026

MANAGEMENT TRENDS... from page 52.

review this report regularly. In doing so, they can spot any trends in spending. For instance, if actual expenses consis tently exceed the budgeted ones, the board may need to reevaluate the budget or cut costs. Most state laws require associations to maintain reserves. To keep track of these reserves, the financial report must include a Reserve Fund Statement. This statement monitors all contributions and withdrawals from the reserve account. It is the responsibility of the association’s board and man agement to review these financial statements. However, board members are volunteer homeowners, so they don’t always have the expertise or background to understand the statements accurately. This is why many community associ ations hire an accountant or a management company to assist with this task. “There is more to community association financial reporting than just numbers and figures. Board members should keep an eye out for any trends that emerge.” There is more to community association financial report ing than just numbers and figures. Board members should keep an eye out for any trends that emerge. For example, the board can explain overspending for a month, but con sistent overspending could indicate deeper financial issues. If there are any significant discrepancies, especially if they can’t be explained, the board should investigate further. Homeowners have a right to review the association’s financial statements. Typically, the board presents these statements at its annual meeting. If not, there are alternative ways for owners to view these reports. Buyers can request to see the association’s financial statements before pur chasing a home in the community. This will provide them with an understanding of the association’s financial health, enabling them to make informed decisions. Homeowners can also ask to examine the financial reports by submitting a written request to the association board or manager. By proactively managing finances, communicating effec tively with homeowners, and seeking professional advice when needed, community associations in New Jersey can navigate financial challenges and support the long-term financial health of the community. n

activities. Even if the income statement shows a profit, poor cash flow can indicate that the association is struggling to pay bills or fund projects. A healthy association maintains positive cash flow. Another key financial statement is the Delinquency Report. This report lists homeowners who have not paid their maintenance fees, along with the amount they owe. It can also include late fees, interest, and lien statuses. A high delinquency rate indicates that many homeowners are defaulting on their dues. This can result in a negative cash flow, meaning that more money is being spent than is coming in Consequently, boards may be forced to make budget cuts or raise fees. To lower delinquencies, the board should practice effective collection methods. Of course, state laws and the association’s governing documents will dictate what collection methods are allowed and how the association should legally apply them. That said, most methods include charging late fees, filing lawsuits, placing liens and even foreclosure. The General Ledger is the complete record of all the association’s financial transactions, It includes detailed entries of each transaction. The general ledger is important because it serves as the basis for all financial statements. The Accounts Payable Report lists the associa tion’s outstanding bills, which are monies the association owes to other parties. With this, the board can understand the association’s financial standing and any upcoming liabilities it must settle. It also helps avoid late payments. The Cash Disbursement Ledger details all the payments the association has made during a specific peri od. It includes checks issued, electronic transfers and other disbursements. This report is important because it ensures that the association is spending funds appropriately and with the board’s authorization. The Budget Comparison Report, also known as the Variance Report, compares the actual income and expenses of the association against the approved bud get. It indicates whether the association has adhered to its approved budget. If there is a big difference in a line item, the board should investigate further. The board should

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