How to Read an HOA or Condo Association Income and Expense Statement

Income and Expense Statement Essentials.
Your Atlanta HOA or Condo Association should be receiving a monthly Income and Expense that presents a detailed summary of the income and expenses for the month and year -to-date and compares those figures with the amounts that were budgeted for the same period.  As a member, you have a fiduciary responsibility to your Atlanta HOA or Condo Association to review the Income and Expense statement each month to determine if your Association is fulfilling its fiscal responsibility to the owners.

Click here to see a video explanation of How to Read and HOA or Condo Association Income and Expense Statement.

Review the Income and Expenses for the Month.
The first step in reviewing an Income and Expense Statement is to review the income the Association received during the preceding month and the expense that it paid.  You will see the raw figures for the month (for example, if your Income and expense Statement showed that $25,000 was received in income and $19,999 was paid in expenses, you may conclude that you had a relatively good month because income exceeded expenses).

Actual Versus Budgeted Figures are in the Income and Expense Statement.
While it is good to know the actual expenditure amounts, it is even more helpful when you compare the actual income and expenses for the month with the amount that was projected in the budget.    In the prior example, if you budgeted  $50,000 in income during the same period and only $10,000 in expenses and your actual income was $25,000 and expenses were $19,999, you would have reason for concern because you are significantly over budget  for the month.

The Income and Expense Statement you receive from your Atlanta Property Management Company should show the budgeted figures in the column next to the actual figures to help you determine whether the Association’s actual revenues and expenses are higher or lower than the amount budgeted.   Whenever you see variances between the actual and budgeted income and expenses, you need to determine if the variance is good or bad for the Association and whether it requires some action on the part of the Board.

Determine the Reason for Any Variances Between Actual and Budgeted Amounts.
A variance that shows revenues are less than the amount budgeted for the month may be a sign that delinquencies are excessive and that more aggressive collection efforts are required.  Similarly, if your expenses are significantly higher than what you budgeted, you should act quickly to reduce your expenses to insure that you are able to continue paying bills for the remainder of the year.

Review the Income and Expenses for the Year.
The Income and Expense Statement you receive from your Atlanta Property Management company should also have the year-to-date revenues and expenses in a column next to the year-to-date budgeted amounts so you can assess the Association’s financial and determine whether any changes need to be made to come in under budget.

Seven Questions to Ask Yourself When Reviewing the Income and Expense Statement.
Ask yourself these seven questions to assess the financial stability of your Association:

1. How much of the fiscal year has passed, e.g., in June, one half of the year has passed.  Has one half of the budget been met?

2. Are you over budget or under budget?

3. If you continue on the same path for the remainder of the year, will you be over budget or under budget?

4. Anytime you can finish the year under budget, you are in a good financial position.

5. If you are going to have a budget shortfall, do you have reserve funds that can be used to cover the shortfall or will you need a special assessment or increase in dues?

6. Do you know the reason for unexpected variances or abnormal actual balances and do the variances indicate a problem in your Association’s finances?

7. What, if anything, does your Association need to be doing differently to increase income or decrease expenses?

Once you familiarize yourself with the Income and Expense Statement, you will quickly and easily be able to scan it for potential areas of concern to discuss with your Atlanta property manager.