All Things Financial (BTW – Financials are FUN!!) Presenters: Gayle Cagianut, Cagianut & Company Patty Cathcart, Jimenez & Company

Rules for Today We will take questions during each topic We 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!!

 GAAP  We will address  Tax  We will address  Legal – especially California Civil Code  Get 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 Sheet Replacement 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 H ◦What are the differences? ◦When is one better than the other? ◦What is Revenue Ruling and why should I care?

Anything Else Financial??? Your Questions