Most community associations’ bylaws, CC&Rs, or other governing agreements spell out the necessity of preparing financial accounts for the organisation. Several states also impose minimum financial statement standards. You can find out more Jones CPA Group
The association or its management business performs the first level of financial reporting by preparing monthly “interim” (not year-end) financial statements for the association. The goal of these financial statements is to give the board of directors and management the tools they need to assess financial performance, particularly budgetary performance. This is referred to as managerial accounting, and it is distinct from financial reporting. Financial statements created for this purpose are typically regarded as being solely for internal use.
If there is a secondary level of financial reporting, it usually applies solely to the association’s year-end financial statements and is done in addition to the financial statements generated for internal use. This usually means that the association’s year-end financial accounts will be audited by an independent CPA. These financial statements are intended not only for internal use, but also for external financial reporting to the association’s members and others. While some governing documents are vague in this area, referring to the distribution of “year-end financial statements,” others are more specific, requiring financial statements “prepared by an independent CPA,” or even more specific, defining the level of financial statement services as compilation, review, or audit. Regulatory obligations may take precedence over the governing documents in some states, requiring a compilation, review, or audit.
Certified Public Accountants (CPAs) are licenced by their state’s board of accountancy and must follow their state’s rules and regulations. Furthermore, the CPA must follow the rules of any other state’s Board of Accountancy in which they practise. As a general rule, a CPA can work for an organisation in any state as long as the services are not performed there. So, if a Texas management company administers a California organisation and the financial services are provided by a Texas CPA, that CPA is only required to follow the rules of the Texas Board of Accountancy. If the same engagement required the Texas CPA to go to California to complete the work, the CPA must either be licenced in California or register to practise in California and agree to follow the requirements of the California Board of Accountancy. The CPA Portability Act, which permits states to share financial information, has been signed by almost all states.