Washington condo and HOA financial statement checklist for boards

A financial statement is useful only when the board can connect it to bank accounts, owner balances, vendor obligations, reserve activity, the adopted budget, and supporting records. Washington law adds specific requirements, but the first legal question is which requirements apply to the community.

The Washington Uniform Common Interest Ownership Act applies in full to common interest communities created on or after July 1, 2018 and to communities that become subject to it through another statutory path. RCW 64.90.365 extends selected WUCIOA sections to many older communities, but it does not list the financial-statement, association-records, or reserve-account sections discussed below among the provisions generally extended. Older condominiums and HOAs should have Washington counsel identify the applicable legacy statute, governing documents, and any election into WUCIOA before relying on a specific requirement.

For an association governed by RCW 64.90.530, the association must prepare, or cause to be prepared, at least annually a financial statement using accrual-based accounting practices. The statute sets an annual audit requirement for associations at or above its assessment threshold and also requires an audit below that threshold unless eligible owners waive it annually. The statute says the $100,000 figure is adjusted under RCW 64.90.065, so boards should verify the current adjusted threshold instead of relying on an old checklist.

The year-end statement should not be the board's first serious review of the books. Use monthly or quarterly reporting to examine the balance sheet, income and expense statement, budget-to-actual results, cash and investments, bank reconciliations, owner receivables, prepaid assessments, accounts payable, reserve activity, special assessments, and written explanations for unusual or unresolved items.

Start with the balance sheet. Tie every bank and investment balance to a statement and completed reconciliation. Confirm that owner receivables agree with the detailed owner ledger, accounts payable agree with the unpaid-bill schedule, and reserve balances agree with separately maintained reserve accounts and project records. Old reconciling items, unexplained credits, negative cash, stale payables, and transfers without documentation should be resolved before the board accepts the package as complete.

Then read the income and expense statement beside the adopted budget. A favorable total variance can hide overspending in insurance, utilities, repairs, legal fees, or contract work. Require explanations by material account, distinguish recurring operations from one-time work, and show whether reserve projects and special-assessment activity are presented consistently with the association's accounting policy.

RCW 64.90.525 requires specified information in a proposed budget, including projected income and expenses by category, assessment amounts and due dates, current regular-assessment contributions to reserves, whether the association has a compliant reserve study and how the budget meets or deviates from it, and the current reserve surplus or deficiency per unit. Because Section 64.90.525 is among the provisions RCW 64.90.365 extends to many pre-2018 communities, it deserves separate applicability review even when other WUCIOA financial sections do not govern the association.

Fund custody matters as much as reporting. For associations governed by RCW 64.90.530, association funds generally must be held in the association's name at a qualified financial institution and may not be commingled with another association's funds, a managing agent's funds, or another person's funds. A managing agent that receives association money must promptly deposit it into an association account as the statute provides.

For an association subject to RCW 64.90.535, reserve accounts must be separated from other association funds. The section addresses permitted accounts and investments, board control, authorized signers, and reserve disbursement controls. With limited exceptions for investments and transfers between the same association's reserve accounts, each reserve disbursement requires signatures from at least two association officers or directors plus supporting documentation tied to a reserve component, an unlisted reserve component, or a documented reserve borrowing and repayment plan.

The board packet should make those controls visible. Include a reserve roll-forward showing beginning cash, contributions, interest, approved project spending, transfers, borrowing or repayment, and ending cash. For each major disbursement, preserve the board authorization, contract, invoice, component classification, payment evidence, and any reserve-study or counsel note supporting the treatment.

Records are part of the financial system. For an association governed by RCW 64.90.495, the association must retain the current budget, detailed receipt and expenditure records and other appropriate accounting records from the last seven years, and financial statements and tax returns for the last seven years, among other records. The same section now includes specific timing for a managing agent to deliver electronic and written association records after termination or board demand. The board should contract for usable exports, not access that disappears when a vendor relationship ends.

Adopt a close calendar with named owners. The manager or bookkeeper can prepare reports, but the board should assign who reviews reconciliations, approves corrections, monitors delinquency, verifies reserve transfers, follows up on payables, works with the tax preparer or CPA, and confirms that the package was delivered and reviewed. Minutes should record the board's review or acceptance without turning the minutes into the accounting file.

Use professional help when the books do not reconcile, owner balances are disputed, reserves are commingled, audits or tax filings are overdue, a management transition is approaching, or the board cannot explain major variances. A manager can coordinate records and reporting, but legal applicability belongs with Washington counsel and audit, tax, and accounting conclusions belong with qualified financial professionals.

This checklist is general board education, not legal, audit, tax, or accounting advice. Statutory coverage, audit thresholds, waiver procedures, accounting basis, governing-document requirements, lender expectations, and professional standards can change the right process for a particular association.