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As we approach the end of the fiscal year for many associations, the Annual Budget Report and Annual Policy Statement are at the top of the mind for many board members and managers. Ensuring your association has properly complied with the Annual Budget Report requirements and Annual Policy Statement requirements listed below will help ensure your association is appropriately prepared for the next fiscal year.

An association can only raise regular assessments for the coming fiscal year without a membership vote if certain obligations have been met. Pursuant to Section 5605 of the Davis-Stirling Common Interest Development Act:

“Annual increases in regular assessments for any fiscal year shall not be imposed unless the board has complied with paragraphs (1), (2), (4), (5), (6), (7), and (8) of subdivision (b) of Section 5300 with respect to that fiscal year.”

This means that, in order for an association to increase regular assessments in a given fiscal year, the association must comply with the Annual Budget Report requirements listed in Section 5300 of the Davis-Stirling Act for that fiscal year.

To ensure your association has properly complied with these obligations, our team at Roseman Law has prepared a checklist of the items that must be included in the association’s Annual Budget Report. Checking off each of these items is a good way to ensure your association has appropriately fulfilled its budgetary reporting obligations.

As they tend to be drafted and reviewed in tandem, Roseman Law has also prepared a checklist for the required components of the Annual Policy Statement pursuant to California Civil Code Section 5310.


The Annual Budget Report must be distributed by the board within 30 to 90 days before the end of its fiscal year. The Annual Budget Report requires the following information to be included:

☐        A pro forma operating budget or a summary, showing the estimated revenue and expenses on an accrual basis.

☐        A summary of the association’s reserves.

☐        A summary of the reserve funding plan adopted by the Board.

☐        A statement as to whether the board has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years or less, including a justification for the deferral or decision not to undertake the repairs or replacement.

☐        A statement as to whether the board has determined or anticipates that one or more special assessments will be required to repair, replace, or restore any major component or to provide adequate reserve for such repair, replacement, or restoration. If so, the statement shall also set out the estimated amount, commencement date, and duration of the special assessment.

☐        A statement as to the mechanism or mechanisms by which the board will fund reserves to repair or replace major components, including assessments, borrowing, use of other assets, deferral of selected replacements or repairs, or alternative mechanisms.

☐        A statement addressing the procedures used for the calculation and establishment of fund reserves to defray the future repair, replacement, or additions to those major components that the association is obligated to maintain. The statement must include, but need not be limited to, reserve calculations computed as: the current cost of replacement or repair multiplied by the number of years the component has been in service divided by the useful life of the component. (May not assume a rate of return on cash reserves in excess of 2 percent above the discount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made).

☐        A statement as to whether the association has any outstanding loans with an original term of more than one year, including the payee, interest rate, amount outstanding, annual payment, and when the loan is scheduled to be retired.

☐        A summary of the association’s various insurance policies.

☐        An Assessment and Reserve Funding Disclosure Summary form must accompany each annual budget report or summary of the annual budget report.

        CONDO PROJECTS ONLY – Separate statements as to whether the common interest condominium development is certified by the FHA and/or VA. These statements must be on separate pieces of paper, in at least 10-point font.

☐        A copy of the completed “Charges For Documents Provided” disclosure identified in Section 4528.


The Annual Policy statement must be distributed by the board within 30 to 90 days before the end of its fiscal year. The Annual Policy Statement requires the following information to be included:

☐        The name and address of the person designated to receive official communications to the association.

☐        A statement explaining that a member may submit a request to have notices sent to up to two different specified addresses.

☐        The location, if any, designated for posting of general notice.

☐        Notice of a member’s option to receive general notices by individual delivery.

☐        Notice of a member’s right to receive copies of meeting minutes.

☐        The statement of assessment collection policies.

☐        A statement describing the association’s policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments.

☐        A statement describing the association’s discipline policy, if any, including any schedule of penalties for violations of the governing documents.

☐        A summary of the association’s dispute resolution procedures.

☐        A summary of any requirements for association approval of a physical change to property.

☐        The mailing address for overnight payment of assessments.

☐        Any other information that is required by law or the governing documents or that the board determines to be appropriate for inclusion.