Understanding your HOA’s monthly financial reports is one of the best ways to protect your investment and ensure your community is being managed responsibly. Each month, your HOA should make certain financial documents available to members. Two of the most important are the Balance Sheet and the Income & Expense Report.
Here’s how to read them and why each part matters:
Your HOA’s assets include cash in operating and reserve accounts, investments, and money owed to the association (accounts receivable). Reviewing these tells you if the HOA has enough liquidity to pay bills and plan for repairs. For example, healthy reserve balances indicate the community is preparing for future capital expenses like roof or pool repairs.
Liabilities include unpaid bills, prepaid assessments from homeowners, and other obligations. Watching this number helps members understand the association’s financial commitments and whether short-term cash flow is under control.
Net worth equals assets minus liabilities. This is a quick snapshot of the association’s overall financial health. A consistently positive net worth indicates stability, while repeated deficits can be a red flag.
Assessment income is the primary source of revenue. Comparing actual collections to the budget ensures the HOA is collecting dues on time and in full. Significant shortfalls may point to collection problems that can impact community services.
This category covers fees from items like pool access cards, resale certificates, or reimbursable legal fees. While smaller than assessments, these funds can help offset costs and reduce the need for dues increases.
From landscaping to insurance to pool maintenance, the expense breakdown shows how your money is spent. Reviewing this monthly ensures the HOA is sticking to the budget and not overspending in any one area.
Healthy communities set aside funds each month for reserves. This money covers major repairs and replacements without the need for special assessments. A monthly reserve contribution that matches the budget is a sign of proactive financial management.
The bottom line shows whether the HOA brought in more money than it spent during the month and year-to-date. Positive net income builds financial strength, while negative numbers need investigation.
The Income & Expense Report explains why the numbers on the Balance Sheet change from month to month. For example, reserve contributions on the income statement increase the reserve account balances on the balance sheet. Similarly, unpaid assessments on the income report show up as accounts receivable on the balance sheet.
By reviewing both reports together, HOA members can see the full financial picture—past performance, current standing, and readiness for the future