Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

As promised in the discussion of condominium associations’ Official Records, we have dedicated a post exclusively to the accounting records that are required to be maintained pursuant to Florida Statute 718.111(12)(a)(11).

 All accounting records of a condominium association must be maintained for at least 7 years. To be prudent, an association may decide to keep all association records since developer turnover. If your property does not have a lot of storage space for hard copy records, there are many companies that specialize in scanning records electronically and/or storing hard copy records. These services are relatively inexpensive and serve to both reduce clutter and protect the association’s records from fire, theft, or natural disaster.

Most professional management companies use high-end accounting software to maintain the bulk of their associations’ accounting records. This software can cost thousands of dollars so purchasing software like this doesn’t make much sense for the self-managed condominium. For very small condominiums, a program such as excel can be used to maintain the association’s financial statements, including homeowner ledgers. However, for larger condominiums, accounting software such as QuickBooks, which costs in the $300 range, likely makes the most sense. As I have mentioned in previous posts, if the Board of Directors does not have a member with a strong accounting background, hiring a 3rd party accountant to maintain the association’s books may be necessary.

Here’s what the FL Statutes say condo associations must maintain:

1.    Accurate, itemized, and detailed records of all receipts and expenditures.

If this seems very broad to you, that’s because it is. The FL Statutes leave it to each condominium to determine exactly what they need to keep, and in what format, in order to meet this requirement. As part of the association’s routine bookkeeping, all monies received and spent will be entered into the association’s accounting software. Generally, these programs allow the user to enter a description of each deposit or expense. Be sure to enter detailed descriptions for each entry including the parties involved and the reason that the funds were received or paid. You’ll thank yourself for doing this the first time you try to look back at specific transactions from previous years. Further, I strongly recommend you keep all of the following either electronically or in hard copy:

  • Copies of all checks received and written by the association
  • Copies of all monthly bank statements for all association bank accounts
  • Copies of all “lockbox” payment detail if this service is used by the association
  • Copies of all final invoices paid by the association (typically these invoices are kept with the copy of the check that paid the invoice)
  • Copies of all reconciliation reports (showing that the bank statements and the association’s bookkeeping reconcile each month-end)

2.    A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid on the account, and the balance due.

This refers to the balances owed by each homeowner for their maintenance fees. This information should already be maintained in the association’s accounting system and there is nothing else special that needs to be done. These balances should include any accrued late fees or interest. I recommend you keep any other amounts owed to the association (e.g. fines, charges backs for work completed by the association on behalf of the homeowner) on a separate ledger for each homeowner as the association may only lien and foreclose on a unit for past due maintenance fees (and associated late fees/ interest). This makes it easier for the association to provide accurate account balances to the association’s attorney (during collection efforts) or prospective buyers. Along with this requirement, I recommend that the association maintain monthly A/R aging summaries (showing those units that are 30, 60 or 90 days past due).

3.    All audits, reviews, accounting statements, and financial reports of the association or condominium.

What an association must maintain specifically under this requirement depends in large part on the size of the association. According to Florida Statute 718.111(13), each association must produce a year-end financial report (or have contracted for the production of this report) within 90 days of fiscal year-end. The type of report required is as follows:

  • An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare GAAP compiled financial statements.
  • An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare GAAP reviewed financial statements.
  • An association with total annual revenues of $400,000 or more shall prepare GAAP audited financial statements.

Details on how to prepare the above financial report are provided in Rule 61B-22.006 of the Florida Administrative Code. The Florida Statutes allows the voting interests of the association to approve a waiver of compiled, reviewed or audited financial statements for up to three consecutive years.

Along with the above described report, I recommend that the association maintain copies of balance sheets and income statements for each month-end that have been approved by the Board.

4.    All contracts for work to be performed. Bids for work to be performed are also considered official records and must be maintained by the association.

This requirement is relatively self-explanatory; however, there are some simple ways to keep track of all of this information in an organized fashion. I recommend that all long term contracts approved by the association be kept together for reference. It may be helpful to keep a list of all contracts including their maturity dates and renewal/ termination provisions. As mentioned above, all other contracts/ invoices can easily be kept along with a copy of the check that was issued by the association to pay the contract/ invoice. Lastly, all bids that were received for work must be kept as well. I recommend keeping these separate from those bids that were actually approved to avoid confusion.

As was mentioned in a previous post, it is a smart idea to keep a copy of each packet that is provided to the Board at each meeting. These packets typically include all bids related to agenda items so maintaining the packets would comply with the above contracts requirement. These packets also typically include recent financial statements, minutes from the previous meeting, the meeting agenda, and more of the items that are considered part of the official records of the association.

I am available via email if you have any questions or comments.

Ryan

 

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

16 Responses to Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

  1. Enjoying all the information and sharing it with others in my community. Keep it up!

  2. Finally, someone who can explain in layman’s terms the ins and outs of condominium associations

  3. Pingback: Florida Statute 718.111(13): Everything You Need to Know About the Florida Condominium Association Year-End Financial Reporting Requirement | Florida Condominium Association Advisors

  4. Our association, Landings of Largo a condominium in Key Largo voted for an audit. I asked the management company who was going to perform the audit. He told me the same CPA who has been doing the financial reports for years. I would think we would be required to have an independent/external audit.

    • Hi Eugene:

      Thanks for reaching out. If your association is required (or the Board decided) to have audited financial statements prepared, they should be completed by an independent CPA firm. This means that the CPA should not have any relationship with the community or the management company. Further, the CPA firm that audits the financial statements should not be the same firm that completes the community’s bookkeeping and monthly financial statement preparation. Outside of that, the Board can choose any CPA they like. If the CPA that your manager is referring to has completed YE financial reports (e.g., audits, reviews, compilations) in the past for your community, that’s OK. There is nothing stopping the same CPA from providing multiple services for one community. That being said, your manager should consider bidding out the audit work to multiple CPA firms to ensure the association isn’t overpaying for the audit. I hope this answers your question.

      Emily

  5. Pingback: Florida Statute Review: 718.111(12) Official Records | Florida Condominium Association Advisors

  6. Is a small condominium association required to keep copies of all checks written, as well as a copy of the check once cancelled of paid by the bank? And is a unit owner allowed to request copies of various documents every week?

    • Hi Stuart –

      Great questions! There is no direct requirement that condominium associations keep copies of checks just that they keep “detailed records of all receipts and expenditures”. Copies of checks may be helpful though. I think the important thing to think about is how the association would be able to confirm payment to a specific entity in the last seven years without copies of checks. Some banks provide copies of checks as part of their bank statements or have copies of checks for several years available upon request. This could be one option.

      Regarding your second question, unit owners are allowed to request copies of official records as frequently as they would like. However, 718.111(12)(b) states that the association may adopt reasonable rules regarding the frequency, time, location, notice, and manner of record inspections and copying. So, if the association has not yet adopted rules at a Board meeting regarding how frequently a unit owner may request copies of records, then they have the right to request them weekly (or daily for that matter) and the association has the obligation to comply.

      Let me know if I can assist you any further.

      Emily

  7. Hello. Is there a part of 718 which requires that all funds be held in a Florida Bank? And would that be for both Operating funds and Reserve funds? Thank you!

    • Hi Donna –

      There is no specific language that I am aware of in 718 requiring funds to be held in a Florida bank with the exception of reserve accounts established by the developer (see 718.618(4)). Of course, most associations keep their primary operating and reserve accounts with Florida banks for two primary reasons. First, it is convenient for unit owners to be able to drop off maintenance fee payments to local bank branches. Second, it is the management company that typically dictates the primary bank used by the association and management companies typically have relationships with local banks. I see no reason why your association couldn’t deposit certain operating or reserve funds into a non-Florida bank if there was a reasonable reason why (e.g., higher interest rates).

      Let me know if this answers your question.

      Thanks,

      Emily

  8. My question is simple…some individuals are asking that the association provide the rental income of each unit. In one case an individual published by unit number certain financial information on the internet. This is 1099 information and by federal law is private. Does Fla. law require the association to provide this private information?

    • Hi Richard –

      When you say rental income, I assume you mean income unit owners earn from renting their units and which the association knows because unit owners provide copies of their leases? If so, what I think you are essentially asking is whether or not unit owner/ tenant leases are part of the association’s official records. This may be a simple question but it is a tricky one and one that I do not know the answer to unfortunately. My gut tells me that leases obtained by the association as part of their rental application process would not be part of the official records and would, therefore, not be open to viewing by unit owners but I do not know for certain. A quick attorney opinion would likely be worthwhile.

      If I have misunderstood your question, please let me know. Sorry I couldn’t be more help on this one.

      Emily

  9. Are condo owners permitted to see the Accounts Receivable details that include unit numbers and names supporting the receivable balance.

    Thank you, Lynn

    • Hi Lynn –

      Yes, this is specifically listed as an official record in Florida Statute 718.111(12)(a) and all homeowners may view all official records.

      Emily

  10. Hi,
    Is there any requirement as to the accounting method used i.e. cash or accrual method. At a recent board meeting it was stated that it must be accrual as stated in Florida Condo law.

    Thanks for your time
    Bill

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