Introduction to HOA Financials

HOAs are non-profit corporations and for tax purposes, must offset “income” received from owners with “expenses” to show they aren’t making a profit. There are several important components to HOA financials and generally, if an HOA is professionally managed the financials are prepared with industry standard software.

The balance sheet shows the individual bank accounts and balances held by the HOA. Washington state has laws about co-mingling funds as well as how the HOA must structure accounts like their insurance and repair/replacement reserves.

The income and expense statement typically includes the annual budget numbers along with the actual income and actual expenses of the HOA.

The annual budget is created and voted on by the members of the Association each year and includes the anticipated, regular income and expenses for the following year. The budget determines the monthly assessments (monthly dues) each owner is required to contribute along with the budgeted reserve fund contribution and insurance reserve requirements.