By Robert Jester
Chair, Finance Advisory Committee
As published in The View, May 2024:
Question of the Month: Is there an annual review of the financial records of this Association by an outside independent Certified Public Accounting firm?
The short answer to this question is YES. But why it is done and what is reviewed is far more enlightening for you, as a resident of Sun City Shadow Hills. The California Civil Code Section 5305 requires a review of the Association financials by a licensed accountant and further requires that the Association financial records must be prepared in accordance with generally accepted accounting principles (“GAAP”). After the review, the audit report is to be distributed to residents within 120 days after the close of each fiscal year.
Sun City Shadow Hills contracts with an independent licensed certified public accounting firm annually for this review. The accounting professionals who conduct the review request the following as a part of the examination that culminates in the final audit report:
- Cash and Investments – This includes the Bank reconciliations for all cash accounts with supporting bank statements. Plus, a schedule of all cash transfers between bank accounts for a period of five days before and after the year-end.
- Accounts Receivable – This is a detail listing and/or ledgers of all accounts receivable, as well as, an analysis of all bad debts written off during the year.
- Inventory – This is a listing of all inventory accounts with supporting count sheets from all departments, which must agree with the general ledger balances.
- Prepaid Expenses – A schedule of all pre-paid expenses, which must agree with the general ledger. This includes all insurance premium billings which will be reviewed by the audit team.
- Fixed Assets – This is a review of the details with reference to all fixed assets and the accumulated depreciation on December 31.
- Accounts Payable and Accrued Liabilities – This includes a review of all accounts payable, accrued liabilities, sales tax returns, and the cash disbursements journal.
- Payroll and Related Liabilities – The schedule of all accrued payroll and vacation.
- Unearned Income/Deferred Revenue – This is the schedules and reconciliations of all unearned income including gift certificates.
- Long-term Liabilities – Schedules of all long-term liabilities and capital lease obligations with statements reflecting current balances.
- Income and Expenses – This request is for the gains and losses on all assets disposed of during the year and copies of all check registers.
- Income Taxes – This includes fuel tax credits review and total tipped wages.
As you can easily see, this is an exhaustive list of financial records that are reviewed annually, as required by the Davis-Stirling Act. The goal of these audits is to assure residents that the Association is functioning accurately, openly, ethically, and honestly, and that the financial records are following GAAP. All of us should feel very secure in that the Association’s Financial records are under constant monthly review from the Finance Advisory Committee and the Board and an annual review by an outside independent licensed Certified Public Accounting Firm.
I am pleased to let our residents know that we have received the 2023 Audit and it has been approved by the FAC and accepted by the Board. Our Association received what is commonly referred to as a “clean” audit. We had some minor adjustments made by the auditor, but none of them impacted our Association’s financial health. We also had a renewed request that all Chartered Clubs in their quarterly reports submit the paid invoices that match up with the checks issued from the club accounts. The Lifestyle Department is to see that this is accomplished to the satisfaction of the Auditor in this fiscal year. The most important conclusion for this community is that this audit demonstrates that this Association is performing properly financially, and this is good news for each of us.
Contact the author at finance@scshca.com.