Accounting - Finances - Civil Law - CA

Section § 5500

This section requires the board to do a comprehensive financial review every month. They must check the current state of the association's operational and reserve accounts, see how actual revenues and expenses match the budget, examine bank statements, and look at detailed financial records like the check register and ledger.

Unless the governing documents impose more stringent standards, the board shall do all of the following:

(a) Review, on a monthly basis, a current reconciliation of the association’s operating accounts.

(b) Review, on a monthly basis, a current reconciliation of the association’s reserve accounts.

(c) Review, on a monthly basis, the current year’s actual operating revenues and expenses compared to the current year’s budget.

(d) Review, on a monthly basis, the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.

(e) Review, on a monthly basis, an income and expense statement for the association’s operating and reserve accounts.

(f) Review, on a monthly basis, the check register, monthly general ledger, and delinquent assessment receivable reports.

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Section § 5501

This law explains that board members can fulfill their review obligations by looking over the necessary documents and statements on their own or with a committee. However, they must confirm this review at the next board meeting, and it must be documented in the meeting minutes.

The review requirements of Section 5500 may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member, reviews the documents and statements described in Section 5500 independent of a board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.

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Section § 5502

This law states that for homeowner associations in California, money cannot be transferred from reserve or operating accounts without the board's written approval. However, small transfers are allowed without approval if they are below certain limits. For associations with 50 or fewer properties, transfers must be under $5,000 or 5% of the annual budget's estimated income, whichever is less. For bigger associations (51 or more properties), transfers must be under $10,000 or 5% of the estimated income, whichever is less. These rules are in addition to any other legal requirements they must follow.

(a) Notwithstanding any other law, transfers shall not be authorized from the association’s reserve or operating accounts without prior written approval from the board of the association unless the amount of the transfer is less than the following:

(1) The lesser of five thousand dollars ($5,000) or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests.

(2) The lesser of ten thousand dollars ($10,000) or 5 percent of the estimated income in the annual operating budget, for associations with 51 or more separate interests.

(b) This section applies in addition to any other applicable requirements of this part.

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