How do you read your association's year-end financial statement?

What is in the statement?

Expect at least three parts: a balance sheet — what the association holds and owes at the end of the year, the reserve fund included; a statement of revenues and expenses — the year's income, owners' assessments and anything else the association earns, and its costs line by line; and notes that explain the figures. Some statements also set the operating fund and the reserve fund side by side.

Audited, reviewed or neither?

An audit is the fullest check: the accountant gives reasonable assurance that the statements are materially correct. A review is lighter: the accountant gives limited assurance. A compilation gives no assurance: the accountant has put together the association's own figures.

The accountant's report at the front of the statement says which it is. If the statement shows no accountant's report, nothing in it says the figures were checked by an independent accountant.

Did the association take in more than it spent?

The statement of revenues and expenses ends with the year's result. Revenue over expenses means the association took in more than it spent; expenses over revenue means the reverse.

Neither is a verdict on its own. A large result either way is worth a question: what caused it, and what the board did about it — carried it into the next year, moved it to the reserves, or covered a shortfall from the reserves or with a special assessment.

Which lines should you compare with the budget?

Set each expense beside the same line in that year's budget. A line well over budget — the management company's fee, a contract, repairs — is a question. So is a line well under budget, if the work it paid for did not happen.

What do the reserves show?

Find the reserve fund's balance at the start of the year, what was added, what was spent, and what is left. Set what was spent against the repairs and replacements the reserve study planned for the year: work done earlier or later than planned, or at a different cost, would explain a difference. Then set the year-end balance beside the reserve figures in the next annual budget report.

What should you ask the board?

• why any line ran well over or under budget;
• what caused a large surplus or shortfall, and what was done with it;
• whether the reserves were spent as planned;
• for the full statement, with the accountant's report and the notes, if you have seen only a summary.

Put your questions in writing, and keep a copy.

What does Synclair do?

Synclair sets out your association's annual budget and year-end financial statement line by line, and shows what the figures say. From a year-end financial statement it sets out the main figures as the statement prints them, and whether an independent accountant reviewed or audited it; a budget for the same fiscal year can be set beside it. These are the association's own figures, not amounts worked out for your home. If you're paying for a service you aren't receiving, you can record it, and it stays on record with a date. If something needs raising, Synclair can draft a letter for you to check and send in your own name, and once it's sent you can record the reply and the outcome.

Only owners pay for Synclair: never managers, insurers or suppliers.

One document is enough to start. It is free for three months, for one property, and the three months begin when your first analysis is ready — not when you sign up. There is one free period for each email address.

Documents for a property in California or New York State are uploaded from an account: sign up, then upload the annual budget or the year-end financial statement.

See a worked example→