All Things Financial

(BTW – Financials are

FUN!!)Presenters:Gayle Cagianut, Cagianut & CompanyPatty Cathcart, Jimenez & Company

Rules for Today

We will take questions during each topicWe need to limit the number of questions

in order to have time to get through everything

Keep the questions as general as possible so that many can relate◦We will stay after for specific questions

Go ahead – you can try and stump us.Have fun!!

GAAPWe will address

Tax We will address

Legal – especially California Civil CodeGet a legal opinion!

Financial Matters Matter

How much time is spent on the Treasurer’s report each Board meeting?

Does the manager and/or Board really review the financials before the meeting?

Are “real” financial items discussed or is it just a routine reading of the balances?

Be honest!!

Reading Financial Statements

10 questions to ask◦ Is the cash protected by FDIC/US Govt?

If not FDIC insured, does the Association have an investment policy?

◦Does the bank statement & reconciliation agree with the cash balance on balance sheet? Are there old, outstanding items on the recon?

◦ Is there a large AR balance? If so, has the Board addressed collection measures? Have they consider a bad debt allowance or write-off?

◦Does assessment income agree with budget?◦ Is there other unusual income? E.g. settlements,

insurance proceeds, etc.◦Are there expenses that are significantly over or under

budget? Are the checks or expenses that are unusual?

How much $$ is enough??

Balance SheetReplacement Fund (Reserves)Look to Reserve Study

◦Percent Funded◦Funding Plan

Operating Fund (Members Equity)CAI/Industry standards

◦1-3 months of operating expenses◦Contingencies & Cash Flows

Reserves vs. Operating

Categorizing reserve vs. operating expenses

Use of reserve money for operations

Due Between Funds – documenting repayment

Borrowing and not repaying

Foreclosed Units

How do I account for a unit that has been foreclosed on by the Association – as we wait for the bank?

How is rent recorded?What about the monthly assessment?What other accounting and tax issues are

there?

Audit vs. Review

What is the difference between an audit and a review?

California Civil Code requirements vs. Governing Documents

Why would you choose to have an audit if a review is okay?

Tax Options

1120 vs. 1120-H◦What are the differences?◦When is one better than the other?◦What is Revenue Ruling 70-604 and why should

I care?

Anything Else Financial???

Your Questions