A finance committee is a group of owners appointed to help the board with the association's money. In a self-managed community, much of the financial work may be carried by the committee. In a professionally managed community, the committee is usually used as a second set of eyes on the budget and the monthly reports.
This article is general information and is not legal or accounting advice. The association's attorney and accountant should be consulted.
What the Committee Is
The finance committee is created by the board, and its duties are set by the board. Before one is formed, the governing documents should be checked to confirm how committees are created and what they may do. Final authority over the budget and spending normally remains with the board.
Members with a background in accounting, banking, or business finance are helpful, but they are not required. A board member, often the treasurer, is commonly appointed to serve as a liaison.
Preparing the Annual Budget
The annual budget is usually the committee's largest task. A draft is prepared by reviewing:
- Actual income and expenses from the current and prior years
- Contracts that are up for renewal, such as landscaping, pool service, and management
- Insurance premiums, which can change significantly from one year to the next
- Utility costs and expected rate changes
- Reserve contributions recommended by the most recent reserve study
- A reasonable allowance for unexpected costs
The draft is then presented to the board, which adopts the final budget at a properly noticed meeting. In a condominium, a copy of the proposed budget must be delivered to owners at least 14 days before the meeting at which it will be considered. In both condominiums and homeowners associations, 14 days' written notice is required for a board meeting at which special assessments will be considered.
Records and Financial Reports
Income and expenses should be tracked in an orderly way, with invoices, receipts, bank reconciliations, insurance policies, and investment statements kept as part of the official records. Monthly reports commonly include a balance sheet, an income statement, a budget to actual comparison, an accounts receivable report, and an accounts payable report. Delinquency details are usually reviewed by the board rather than published.
Florida law also sets the level of the annual financial report by total annual revenue. Under sections 720.303(7) and 718.111(13):
- Revenues under $150,000 require a report of cash receipts and expenditures.
- Revenues of $150,000 to less than $300,000 require compiled financial statements.
- Revenues of $300,000 to less than $500,000 require reviewed financial statements.
- Revenues of $500,000 or more require audited financial statements.
A homeowners association with at least 1,000 parcels must prepare audited statements regardless of revenue. The report must be prepared within 90 days after the end of the fiscal year, and owners must be given a copy or notice that a copy is available at no charge.
Bids and Reserves
The committee can help the board request and compare bids for contracts and projects. Bids should be compared on the same scope of work, with insurance, licensing, warranties, and payment terms reviewed along with price. The lowest bid is not always the best value.
Reserves are another key area. A reserve study should be performed by a qualified professional, and it is used to set yearly contributions for roofs, paving, painting, and other major components. The committee can monitor reserve balances, confirm that contributions are being deposited, and flag projects that are coming due. More on this subject can be found in
the importance of reserves for your condo or HOA.
Advising the Board and Open Meeting Rules
The committee presents information and recommendations, and decisions are made by the board.
Committee meetings may be subject to the same notice and open meeting rules as board meetings. In a homeowners association, section 720.303(2) applies those rules to committee meetings at which a final decision will be made about spending association funds. In a condominium, section 718.112(2)(c) applies notice rules to committees that take final action for the board or make recommendations about the budget. The association's attorney should confirm which meetings must be noticed.
Does a Self-Managed Community Need One
A finance committee adds internal controls. When more than one person reviews bank statements and invoices, errors and misuse are more likely to be caught. Warning signs to watch for are described in
HOA fraud: know the signs.
Help With Association Finances
Budget preparation, monthly financial reports, and reserve tracking are handled for the communities managed by Condominium Associates, and finance committees are supported with the information they need. To talk about your association's financial management,
contact us.
