Year-end financial package

The two statements you should expect

A balance sheet is a snapshot, not a period: it reports the association's assets, liabilities, and fund balances as of one specific date, usually December 31 or your fiscal year end. An income statement covers the whole year and nets revenue against expense to arrive at one bottom-line number. They answer different questions, and a package missing either one is incomplete.

"A balance sheet lays out the ending balances in a company's asset, liability, and equity accounts as of the date stated on the report."

Source: The balance sheet, AccountingTools

The cover letter matters more than the numbers

Before you read a single figure, find the CPA's cover letter and see which of three engagements it describes. They are not interchangeable, and only two provide any independent assurance at all.

"In a compilation, a CPA does not provide any assurance."

Source: What is the difference among a compilation, review, and audit?, AICPA & CIMA

A review requires an independent CPA who performs inquiry and analytical procedures to reach limited assurance that nothing looks materially wrong. An audit goes further: the CPA tests transactions, evaluates internal controls, and assesses fraud risk before issuing an opinion. A "reviewed" package and an "audited" package are not the same document with a different label; only the audit ever looks at fraud risk directly.

One line item that needs your CPA, not a board vote

Some years the association takes in more assessment income than it spends. What happens to that excess is a decision with tax consequences, tied to a federal election the association may make each year, not something a board should settle by motion at the meeting where the package is presented. If the year-end package shows an excess of income over expense, that is your cue to ask the CPA who prepares the association's return what the options are and what was chosen, rather than deciding it yourselves.

What varies before you accept the package

Whether your association is required to obtain a compilation, a review, or a full audit, and at what size or threshold, is set by your governing documents and state statute, not by any fixed industry rule. One state's law shows how detailed this can get. California requires its boards to review specific items monthly, illustrating one model of thorough financial oversight, though the list itself is that state's statute, not a national standard.

"Review, on a monthly basis, a current reconciliation of the association's operating accounts."

Source: Civil Code Section 5500, State of California

Check your own bylaws and state statute for what your association is actually required to obtain, and confirm it with the CPA before assuming last year's engagement level still applies.