Timeshares The Vacation and Timeshare Plans Act (F.S. 721), provides that timeshares arrange for an annual audit of the financial statements of the timeshare plan by a certified public accountant licensed by the Board of Accountancy of the DBPR, in accordance with generally accepted auditing standards as defined by the rules of the Board of Accountancy of the DBPR. The financial statements must be prepared on an accrual basis using fund accounting and must be presented in accordance with generally accepted accounting principles. A copy of the audited financial statements must be filed with the DFCTSMH for review and forwarded to the board of directors and officers of the owners’ association, if one exists, no later than five calendar months after the end of the timeshare plan’s fiscal year. If no owners’ association exists, each purchaser must be notified, no later than five months after the end of the timeshare plan’s fiscal year, that a copy of the audited financial statements is available upon request to the managing entity.
HOAs If the association chooses to send a notice instead of a copy of the report, the notice must state that the HOA will provide a copy of the report to the member, without charge, within 10 business days of the receipt of the member’s written request. [F.S. 720.303(5)] Additionally, if the HOA budget does not provide for reserve accounts and the HOA is responsible for certain capital improvements that may result in a special assessment if reserves are not provided, each annual financial report must include a disclosure that notes the lack of reserves and the statutory right of members to elect to establish reserves. If the HOA budget provides for funding reserve accounts but such accounts are not created or established, the annual financial report must provide a disclosure that reserve funds are not calculated nor included pursuant to the HOA Act. (See F.S. 720.303(6) for requirements and disclosure language.)
ANNUAL FINANCIAL REPORT REQUIREMENTS
Based on revenue Condominiums, cooperatives, and HOAs must base annual financial reports on the total of actual annual revenue it received (not the amount budgeted). The minimum level report that an association must produce is as follows:
Report Type Cash receipts
Association Revenue Less than $150,000
Compilation
$150,000 to less than $300,000
Review
$300,000 to less than $500,000
Audit
$500,000 or greater
Types of reports The DBPR requires that certified public accountants prepare the reviews and audits for condominiums, cooperatives, and timeshares. The HOA Act is silent on this issue. ● Cash receipts : A cash receipts report recognizes income when received and expenses when payment is made. Statutes require certain items to be included in the report. It is prepared by using cash basis accounting by anyone who is competent to do so. ● Compilation : A compilation report is limited to representing information that is provided by management. The preparer neither audits nor reviews the statements or underlying financial information and does not issue an opinion on the statements. It is usually prepared by a certified public accountant using accrual accounting. Primary types of accounting ● Cash basis : An accounting method that recognizes revenue and expenses at the time the physical cash is actually received or paid out. Higher level of financial reporting Under certain conditions, a cooperative or HOA may vote for a higher level of report. Cooperatives and HOAs In cooperatives and HOAs, if 20% of the eligible TVI petition the board for a more comprehensive financial report, the association must give notice and hold a member meeting within 30 days of receipt of the petition. The association must provide 14 days’ notice to the members. If the members approve the higher-level report, the association shall, pursuant to statute, amend the budget or pass a special assessment to pay for the financial report regardless of any provision to the contrary in the governing documents.
● Review : A review report consists primarily of inquiries of association personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit. It is also a representation of information that is provided by management. It is prepared by a certified public accountant using accrual accounting. ● Audit : An audit report standards require that the accountant plan and perform the work to obtain reasonable assurance about whether the financial statements are free of material misstatements. The audit includes examining, on a test basis, the evidence supporting the amounts and disclosures that are used in the financial statements. The auditor assesses the accounting principles that are used and the estimates that are made and evaluates the overall financial statement presentation. They may randomly review contracts and receipts to verify that they are accurately reflected in the audit. It is prepared by a certified public accountant using accrual accounting.
● Accrual : An accounting method that measures the performance and position of an association by recognizing economic events, regardless of when cash transactions occur.
Cooperatives Upon approval by a majority of eligible TVI attending a duly called and quorumed member meeting, a cooperative must prepare a more comprehensive type of financial report, regardless of any provision to the contrary in the association documents. The members must vote to select the specific type of report (review, compilation, or audit) at the member meeting. The association must provide or make available the report to its members within 90 days of the meeting or within 90 days of the end of the fiscal year, whichever occurs later.
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