Florida Community Associations are Obligated to Provide Financial Reports to Owners

Apr 26, 2016 | Associations, Board of Directors, Communication, Residents

Question: At the recent annual meeting for my condominium association the owners were presented with a question asking whether the association should waive the requirement to have an audit of the association financial records conducted. The same question has been asked for the past few years. I looked and our bylaws specifically require an audit to be conducted every year. Is my condominium association following the law? D.T. (via e-mail)

Answer: Florida community associations are statutorily obligated to provide owners some type of year-end financial report. There are different types of financial reports which can be prepared: (i) a statement of cash receipts and expenditures, (ii) a compilation, (iii) a review, and (iv) an audit. The type and level of year-end financial report a community association is required to prepare is dependent on the size of the association, the language of the governing documents, and the association’s annual revenue.

The first place to start the analysis is your governing documents. If your condominium association’s governing documents specifically require that an audit be prepared each year, you must comply with this requirement and your association doesn’t have the option to vote to “waive down” to a “lower level” financial report, such as a review or compilation. I recommend you confirm that the yearly obligation to conduct an audit is, in fact, contained in your association’s governing documents. Such a mandatory, yearly requirement can impose a financial burden on an association. Many of my community association clients who had similar requirements contained within their governing documents have sought my assistance to have this requirement “amended out” of the governing documents.

If your governing documents do not mandate an audit be conducted every year, then the type of financial report your association must perform each year will depend on the association’s total annual revenues and number of units. As an example, a condominium association with 50 or more units with annual revenues of $500,000 or more is required to prepare audited financial statements.

Regarding the vote to “waive down” the association’s financial reporting requirement, the law states that the meeting to vote on whether to “waive down” the level of required financial report must occur before the end of the fiscal year and is effective for either the fiscal year in which the vote is taken or the following fiscal year, depending on how the question is structured. For homeowners’ associations, there is no statutory or administrative guidance on point, and presumably no requirement that the vote take place prior to the end of the fiscal year.
Additionally, the Florida Condominium Act states that condominium associations cannot “waive down” year-end financial reporting requirements for more than three consecutive years. For homeowners’ associations, there is no statutory limitation on the number years the owners can “waive down” financial reporting requirements.

Originally posted on Florida HOA Law Blog