Board treasurers are often volunteers with no accounting training, and most owners have never read a balance sheet. Yet the association's financial statements are the best way to know whether the building is healthy — and board members, as fiduciaries, are expected to understand them.
The good news: you don't need to be an accountant. You need to know what each report tells you, which numbers deserve a closer look, and which questions to ask. This guide walks through each report, a few simple ratios, the difference between an audit and a review, basic fraud controls, and what owners can look for.
What Illinois requires
The Illinois Condominium Property Act sets several baseline requirements:
Detailed records. The board must keep detailed, accurate records of receipts and expenditures (Section 18.4(i)), and keep the books and records for the current and 10 preceding fiscal years (Section 19).
Annual accounting to owners. Every year the board must give all owners an itemized accounting of the prior year's actual common expenses, showing reserves, capital expenditures, repairs and real estate taxes, the amounts collected, and the net surplus or deficit (Section 18(a)(7)).
Accounting standards for larger associations. Associations with 100 or more units must use generally accepted accounting principles (GAAP) in meeting their accounting obligations under the Act (Section 18.10).
Owner access. Owners can inspect the books and records on written request (Section 19).
Whether you need a formal audit or review by a CPA depends on your declaration and bylaws, your lenders and your board's judgment. Many associations get one every year; it's a strong check on errors and fraud.
A few terms to know first
Cash basis vs. accrual basis. Cash-basis statements record income when money arrives and expenses when bills are paid. Accrual-basis statements record income when it's earned (when assessments are billed) and expenses when they're incurred, even if not yet paid. Accrual gives a more accurate picture and is required under GAAP; smaller associations sometimes use cash or a modified approach. Know which one your reports use.
Operating fund vs. reserve fund. The operating fund covers day-to-day expenses. The reserve fund is savings for major repairs and replacements. Good statements keep them clearly separate.
Receivables. Money owed to the association, mostly unpaid assessments.
Payables. Bills the association owes but hasn't paid yet.
Prepaid assessments. Assessments owners paid before they were due. It's a liability because the association hasn't "earned" that money yet.
Variance. The difference between the budget and actual results.
The four reports every board should see monthly
1. The balance sheet
The balance sheet is a snapshot of what the association owns and owes on a given date.
Assets: operating cash, reserve cash and investments, assessments receivable (money owners owe), prepaid expenses.
Liabilities: unpaid bills (accounts payable), assessments owners paid in advance (prepaid assessments), loans.
Fund balances (equity): what's left, usually split between operating and reserve funds.
What to check: Does reserve cash in the bank match the reserve fund balance? If the reserve fund shows $400,000 but reserve accounts hold $300,000, money has been used for something else and needs explaining.
A simple example:
Operating cash: $45,000
Reserve cash and investments: $380,000
Assessments receivable: $12,000
Prepaid insurance: $18,000
Total assets: $455,000
Accounts payable: $22,000
Prepaid assessments: $8,000
Total liabilities: $30,000
Operating fund balance: $45,000
Reserve fund balance: $380,000
Total fund balances: $425,000
Total assets ($455,000) equal liabilities plus fund balances ($30,000 + $425,000). Reserve cash matches the reserve fund balance — a good sign.
2. The income statement (budget vs. actual)
This shows income and expenses for the month and year-to-date, compared with the budget.
What to check:
Lines that are well over or under budget, and why.
Whether the reserve contribution was actually transferred, not just budgeted.
Utility and insurance lines, which often drive surprises.
One-time items that should have been paid from reserves or a special assessment.
A variance isn't bad by itself — a snow-heavy winter will blow the snow removal budget. What matters is that someone can explain it.
Tip: Look at year-to-date numbers, not just the month. A single month can be distorted by timing — an annual insurance payment, a quarterly bill. Year-to-date results show the real trend.
3. The reserve report
This shows reserve balances, contributions, interest earned, and spending on capital projects.
What to check:
Is the balance on track with the funding plan in your reserve study?
Are reserve funds being spent only on capital repairs and replacements?
Are reserve investments safe and liquid enough for the projects coming up?
4. The delinquency (aged receivables) report
This lists owners who owe money, grouped by how long they've been behind — 30, 60, 90+ days.
What to check:
Total delinquencies as a share of annual assessments.
Accounts over 90 days: are they being handled under your written collection policy?
Trends: is the total rising month over month?
(This report is for the board; individual owner balances aren't shared with other owners.)
Simple ratios that tell you a lot
You don't need complex analysis. A few numbers give a quick health check:
Months of operating cash. Operating cash divided by average monthly expenses. Less than one month of cash can mean trouble paying bills on time.
Delinquency rate. Total delinquent assessments divided by annual assessment income. A rising rate needs attention; lenders also look at delinquencies when reviewing a building for mortgage eligibility.
Reserve contribution as a share of the budget. Compare it to your reserve study's recommendation and to lender guidelines.
Percent funded. From your reserve study — the reserve balance compared to what it "should" be given the age of components.
Budget variance. Year-to-date actual expenses as a percentage of year-to-date budget. Large, unexplained variances mean the budget or the spending needs a closer look.
Track these each month on a single page, and trends become obvious.
Bank reconciliations
Ask to see the monthly bank reconciliations — the report that matches the association's books to its bank statements. They're one of the most important fraud controls. Unreconciled differences, or reconciliations that are months behind, are a red flag.
Audit, review or compilation?
CPAs offer three levels of service for year-end financial statements:
Audit: the highest level. The CPA tests transactions, confirms balances with banks and others, reviews internal controls, and issues an opinion on whether the statements are fairly presented.
Review: a middle level. The CPA performs analysis and inquiries and provides limited assurance, but doesn't test transactions as thoroughly as an audit.
Compilation: the CPA assembles financial statements from the association's records without providing assurance.
Check your declaration and bylaws for any requirement, and consider lender expectations. Many boards choose an annual audit or review because it's a strong independent check on errors and fraud. The CPA's letter to management, if provided, often includes useful recommendations.
Internal controls: protecting the association's money
Most association fraud is preventable with basic controls. Every board should confirm:
Two people are involved in moving money — one who prepares or requests a payment and another who approves it.
Approval limits are set — for example, the manager can approve routine invoices up to a set amount, and larger payments need board approval.
Reserve transfers require board authorization, and reserve accounts require more than one signer.
Bank statements go to someone outside the bookkeeping process, such as the treasurer, who reviews them directly.
Reconciliations are completed monthly and reviewed by the treasurer.
Vendor lists are reviewed periodically for unfamiliar names.
Fidelity coverage is adequate — Illinois requires a fidelity bond for associations with six or more units, in the full amount of association funds and reserves.
Red flags to watch for
Reserve cash lower than the reserve fund balance.
Operating cash that's regularly too low to pay monthly bills.
Rising delinquencies without clear collection activity.
Repeated large "miscellaneous" or "other" expenses.
Financial reports arriving late or inconsistently.
Payments to vendors the board doesn't recognize.
Transfers between operating and reserve accounts that nobody voted on.
Large accounts payable balances, suggesting bills aren't being paid on time.
Bank reconciliations with unexplained differences.
Questions every board member can ask
1. Do our bank balances match the balance sheet?
2. Why is this line over (or under) budget?
3. Did this month's reserve transfer happen?
4. What's the plan for accounts more than 90 days delinquent?
5. Are we on track with our reserve study?
6. Who can move money, and who approves payments?
7. When was our last audit or review, and were there any recommendations?
8. Are we on track to finish the year with a surplus or a deficit?
An annual financial calendar
Monthly: financial package, bank reconciliations, delinquency review.
Quarterly: deeper budget-versus-actual review; reserve investment review.
Late summer/fall: budget preparation for next year.
Year-end: close the books, decide how to handle any surplus or deficit.
After year-end: CPA audit or review; itemized annual accounting delivered to owners.
For owners: what to look for
You don't need to review every report, but a few things tell you a lot about your association:
The annual itemized accounting the board must send each year.
The budget and how it compares to actual results.
The reserve balance compared to the reserve study.
The delinquency total (in aggregate).
The most recent audit or review, if one was done.
You can request financial records under Section 19. Ask questions at board meetings — a well-run board welcomes them.
Frequently asked questions
Does my association need an audit every year?
Check your declaration and bylaws. The Act requires detailed records and an annual itemized accounting; many associations also choose an annual audit or review.
Can owners see the monthly financial statements?
Financial records are among the association records owners can request under Section 19. Many boards also share monthly or quarterly summaries proactively.
Why does the balance sheet show money we don't have yet?
On an accrual basis, assessments billed but not yet paid appear as receivables. That's money owed to the association, not cash in the bank.
What should a treasurer do first?
Review the most recent balance sheet and bank reconciliations, confirm who can move money, and read the reserve study. Then meet with the manager or bookkeeper to go through the monthly package line by line.
The bottom line
Financial statements tell the story of your building's health. Read them every month, track a few simple ratios, insist on good controls and ask questions until you get clear answers. That's not micromanagement — it's exactly what Illinois law expects of a board acting as fiduciaries for the owners.
Related reading:
How Much Should an Illinois Condo Association Keep in Reserves?
Adopting Your Condo Budget in Illinois: A Step-by-Step Guide for Boards
Fiduciary Duty for Illinois Condo Board Members: What It Means and How to Protect Yourself
Illinois Condo Associations Need a Written Collection Policy by January 1, 2027
Pimmit Run Management delivers clear monthly financial packages to Illinois condo boards, including bank reconciliations, budget-versus-actual reports, reserve tracking and delinquency reports. Contact us to see a sample.
This article is general information, not accounting or legal advice. Consult your association's CPA and attorney with specific questions.
This article is general information, not legal advice. Consult your association's attorney about your specific situation.