Board Fiscal Duty Checklist

I. Associations must file a federal and state tax return or exemption statement by the 15th day of the third month after the fiscal year ends. Since requirements can vary, it is best to consult the association's C.P.A. or tax advisor regarding applicable filing or reporting requirements.
2. Associations that have their own employees (regardless of compensation paid) or that have non-incorporated independent contractors (paid $600 or more during the year) must file appropriate forms with the state and federal government at various intervals during the year. Consult the association's C.P.A., tax advisor, manager or payroll contractor to be sure all forms are being processed.
3. Within 120 days after the fiscal year ends, a C.P.A. must prepare at least a "review"2L and the association must distribute it to the members, if the association's gross income exceeds $75,000. [CC § 1365(b)] However, any incorporated association which had at least $10,000 in gross revenue, must make available a balance sheet, income statement and statement of changes in financial position which is (I) accompanied by report from a C.P.A. or (2) an officer's certificate that its balance sheet was prepared without audit. [Corp. Code §8321] The annual report must also contain a statement of where the names and addresses of the current members are located [§8321(b)]. It must also contain a statement of any corporate "indemnifications or material financial transactions" between the corporation and any officer, director or holder of I 0% or more of the voting power. The statute contains many details. [Corp. Code §8322]
4. Directors must disclose any contract or other transaction between the corporation and (I) the director or (2) any entity in which the director has a material financial interest. Detailed rules apply for proper ratification of any such transactions. [Corp. Code §7233]
5. Corporations may not make any distributions of funds to members except upon dissolution. [Corp. Code §7411]
6. At least quarterly, review a current reconciliation of the association's operating and reserve accounts. [CC §1365.5(a)(I)&(2)]
 7.' At least quarterly, review the current year's actual reserve revenues and expenses compared to the current year's budget. [CC §1365.5(a)(3)]
 8. At least quarterly, review an income and expense statement for the association's operating and reserve accounts. [CC §1365.5(a)(5)]
 9. In most cases monthly, review the latest account statements from each financial institution where the association has its operating and reserve accounts. [CC §1365.5(a)(4)]
 10. Be sure that the signature cards on all reserve accounts require at least two signatures. All signatures must be either board members, or one may be an officer who is not on the board. [CC §I365.5(b)]
 II. Do not spend reserve funds except for reserve items, or for litigation involving the repair, restoration, replacement or maintenance of major components which the association is obligated to maintain. The board may borrow money from a reserve fund for operating expenditures. However, any borrowed funds must be restored within I year from the date of the first transfer, with limited exceptions. [CC §1365.5(c)]
 12. At least quarterly, if the board uses any reserve funds to pay expenses for any litigation, make an accounting of all litigation expenses and make it available for inspection at the association's office. Give the members written notice of (I) any decision to use reserves to pay for such litigation expenses and (2) the location of the accounting that is available for their inspection. [CC §1365.5(d); Corp. Code 5016]
13. At least annually, review the reserve study and make any necessary adjustments. [CC §1365.5(d)]
14. To obtain exemption from personal liability for volunteer directors, purchase both general liability and directors and officers liability insurance. The amount must be at least $500,000 for associations up to 100 units and $1,000,000 for those larger than 100 units. [CC §1365.7]
15. To prevent suit and joint and several liability against individual owners, if the association contains any property owned in common by the owners, purchase general liability coverage of $2,000,000 in associations with 100 units or fewer and $3,000,000 in those with more than 100 units. [CC §1365.9]
16. At least every 3 years, conduct a reasonably detailed and competent visual inspection of the accessible components the association must maintain as part of a study of the association's reserve account requirements (if the replacement cost of the components the association must maintain is at least one-half of the association's fiscal budget for the last 3-year period, excluding reserves).§! Consult the statute for many detailed requirements. [CC §1365.5(e)]
17. We have found that some associations are paying real estate taxes on their common areas. Most, if not all, associations should be exempt. Check with legal counselor your CPA. [R&T Code §2188.50]
18. If the association owns common area lots, be sure the county assessor has your correct mailing address, even if you do not normally get tax bills. If a tax bill appears for any reason, or if you become subject to a mechanic's lien, the only address may be the address in the public records. You want to be sure you know about any tax liens or other liens against the property. Many of these mailing addresses are still old addresses for the developer.
19. Associations regularly pay water bills on meters that serve other properties, or they encounter claims to pay water bills that someone else has been paying. It is critical for boards and managers to know that the water bills match up to a meter serving the association and that meters serving the association have a water bill coming to the association.