Financial statements for condominium associations

The basic planning of a non-profit condominium association should start with an annual budget, using the same pertinent expense descriptions in the budget, in the general ledger account, and on the financial statement. The making of the budget enables the association's directors to make an equitable assessment for each homeowner. Comparing the current year with the prior year budget permits a decision on the adequacy of reserves for contingencies. A statement of operating activities which depicts budget, prior year, and current year actual is the principal financial statement. It effectively compares performance to budget, providing a test for budget reliability and over/under items that might require investigation. The records and statements should be on an accrual basis. Most states consider nonprofit condominium associations exempt from income taxes. The federal government allows corporate associations to annually elect tax-exempt status by Section 528, or to be taxed as a regular corporation. Financial statements of the tax-exempt associations should segregate investment income and related income tax from basic functional net income. Exhibits.