Reader Questions - Show Us the Money (Records)!

Dear Mr. Richardson,

Thank you for writing for [our paper]. I find the questions and your answers very informative and useful. Can an owner within a HOA request in writing from the Board that copies of association financial statements be provided on a monthly basis to the homeowner? Or, does the request for the financial statements have to be made monthly? Thank you in advance for your answers.

D.G., Redlands

Dear D.G.,

The main statute giving California HOA owners the right to see certain association financial records is Civil Code 5200. Financial statements are included in the list of financial records which can be inspected or copied by members. A member must request copies in writing, and the HOA has ten business days (two calendar weeks) from its receipt of the request to provide the copies. The HOA can charge for copying and mailing the copies.

The law does not provide for a standing monthly request for documents, so if you want to see the financial statement monthly, you will need to request it monthly. If you want to review financial records that regularly, run for the board. You’ll get them, most likely, in your board packet each month.

An increasing number of associations post financial information on their web sites, in the “members only” area. This provides for transparency, at little cost.

Thanks,
Kelly

Dear Kelly,

I appreciate your weekly column in [our paper] and find it helpful.

I have been charged with looking into the possibility of establishing an endowment fund for our HOA. We believe there are members of our community who would be willing to make donations and/or include our community in their estate planning. Can you give me your thoughts on such an endowment fund?

Thank you for your help,

J.V., Oceanside

Dear J.V.,

I applaud your association’s creative thinking, but suggest you discuss this with an accountant before going much further on this idea. I am not sure that improving the association property would be a tax-deductible donation, but I am not a tax guy. Civil Code 5600 only allows associations to assess for their actual expenses. If some owners want to contribute their money to help the rest of the owners, that certainly offsets all the situations I see where certain members don’t pay their monthly assessments at all!

Best regards,
Kelly

Mr. Richardson,

Our HOA treasurer is a tax preparer and an enrolled agent and is quite capable maintaining the financial records. Are we required by law to submit out financial records to an outside accountant for review.

Thank you, L.S., Yorba Linda

Dear L.S.,

Pursuant to Civil Code 5305, if the association’s gross income exceeds $75,000 it must have a certified public accountant (CPA) review the year-end financial statement. That review must then be sent to members within 120 days after the end of the association’s fiscal year. “Reviews” are different than “audits”. A review does not question the accuracy of the numbers stated, but examines how the numbers are presented (and if they add up). Audits are quite expensive. It is great that your treasurer can prepare the financial reports, but it is probably better for the association and the treasurer if they are prepared by an outside source.

Thanks,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.