How to read your condominium's annual accounts
The annual accounts are the most important document your administrator presents. Knowing how to read them is what separates those who approve out of reflex from those who decide on solid grounds. This text explains the four documents to ask for, the warning signs to look for in each, and ends with a 12-point checklist to audit the accounts before the annual general meeting.
The four documents to ask for
The law is sparing — it states that the administrator renders accounts annually (Article 1436(i) of the Civil Code), but it does not list which documents. Settled professional practice has established four pieces. If an administrator presents only two or three, a formal request for the fourth is a legitimate reason to suspend approval.
- Schedule of expenses. A detailed list, by heading, of every expense of the financial year, each referenced to its supporting document (invoice/receipt).
- Bank current-account statement. The bank movements with date, counterparty and amount, exported by the bank.
- Budget-vs-actual statement (the balancete). A comparison between the budgeted and the actual figures, showing the variances.
- Statement of the common reserve fund. Opening balance, movements and closing balance of the fund, kept separate from the current accounts.
The sections that follow explain what each should contain and the warning signs that appear over and over in poorly run condominiums.
What changes when the administrator is an established professional
The four documents above are the defensible minimum. Settled professional practice unfolds them into seven self-standing pieces sent out with the notice of meeting — a separation that makes critical reading far simpler and concealment far harder:
- Management Report and Accounts. The narrative piece that opens the presentation, with an opening note, the key figures of the year (closing balance, reserve fund, owners' arrears, net result) and a list of the works carried out on the building during the year.
- Financial Summary. Cash and bank balances at the close of the year, with the accumulated common reserve fund.
- Budget Analysis. Budget approved vs committed vs settled, heading by heading, with the variance calculated for each.
- Balance Sheet. The formal accounting statement, with the condominium's assets, liabilities and net position.
- Expenses (supplier documents). An exhaustive list of each invoice grouped by category, with document number, supplier, dates and payment status.
- Owners' arrears. A list, unit by unit, of the overdue fees, identifying each document yet to fall due.
- Outstanding supplier invoices. Unpaid invoices grouped by supplier, with the due date.
When you receive only two or three pieces, or when they arrive merged into a single summary PDF, it is reasonable to ask for the detail. The separation is not bureaucracy — it is what lets each owner check a specific area without having to decipher accountancy.
Schedule of expenses — what is there, what is missing
A well-made schedule of expenses shows every expense of the year grouped by heading (cleaning, electricity, maintenance, insurance, legal, and so on), with the counterparty (supplier), date, amount and a reference to the supporting document. Reading starts with the total and the spread across headings — if one heading concentrates more than 30% of the total, it is reasonable to ask why.
A "Sundry" or "Other expenses" heading above 5% of the total. It points to opacity — legitimate expenses should have a heading of their own.
Expenses with no supporting document identified. Tax law requires an invoice/receipt for every expense; its absence is a tax irregularity and exposes the condominium to a fine.
Extraordinary expenses with no record of an assembly decision. Every expense outside the budget must be covered by a resolution — taken beforehand (the rule) or ratified afterwards in a later set of minutes, with a concrete justification (urgency, an act of conservation, and so on). What cannot stand is an expense outside the budget with no decision of the assembly at all, before or after.
Repeated maintenance on the same equipment. Three call-outs to the same lift in a year signals either a poor choice of contractor or equipment at the end of its life that has not been reported to the assembly.
Payments to suppliers with no written contract. This raises the risk of inflated prices, points to an informal relationship and makes market comparison harder.
Bank current-account statement — where the money comes in and goes out
The bank statement is the hardest document to manipulate — it comes straight from the bank. It is also the one that lets you cross-check against the schedule of expenses: every entry in the schedule should correspond to an outflow on the statement. Asking for the statement in digital format (PDF or CSV) makes reading and cross-checking easier.
Transfers with no clear identification of the beneficiary. A "transfer" with no company name or description is a red flag. It may point to a diversion to the administrator's personal account.
A significant cash balance held in hand. Handling the condominium's money in cash is problematic — there is no trail. Balances above €500 in "petty cash" deserve an explanation.
Income more than 10% below budget. It points to failed collection of fees — ask for the list of debtors and proof of the notices sent.
A mismatch between the statement and the schedule of expenses. If there are outflows at the bank that do not appear in the schedule, or headings in the schedule with no matching outflow, there is an accounting error or concealment.
Multiple small transfers to the same recipient. A typical pattern of splitting an expense to stay under approval limits. Each one looks small; the sum is significant.
Budget-vs-actual statement — the condominium's financial health
The balancete sets the budget approved for the year against what actually happened. It shows the variance by heading, owners' arrears, suppliers owed and the net result of the year. It is the piece that answers the main question: is the condominium in balance?
Owners' arrears above three months of fees. Out-of-court collection is the administrator's duty. When arrears drag on, it is reasonable to ask for the record of the notices sent to debtors and the collection plan under way.
Overdue fees greater than the reserve fund. The condominium is left with no cushion for the unexpected. In a burst pipe or a lift breakdown, it is paid for through an urgent extraordinary levy, with all the strain that brings.
A recurring negative result for the year. It signals either badly calculated fees (too low to cover the real expense) or runaway spending. In either case, it calls for an immediate budget review.
Suppliers owed at the close of the year. The condominium has closed the year without paying its bills. There is a risk of interest, court proceedings and service cut-offs in the following year.
Reserves used to cover current expenses. It points to management on the edge of insolvency. By law the reserve fund is meant for the building's conservation expenses — using it for current expenditure breaches the purpose set out in Article 4(1) of Decree-Law 268/94.
Common reserve fund — the legal cushion
The common reserve fund is required by law (Article 4 of Decree-Law 268/94). Each owner contributes to this fund every year with at least 10% of their share of the condominium's expenses. It exists for a single purpose: to pay for the building's extraordinary conservation expenses — repairs to the roof, façades, lifts at the end of their life, infrastructure. It cannot be used for current expenditure.
A balance below 10% of the annual budget, with no resolution to bring it back into line. The law requires a minimum contribution, from each owner, of 10% of their share of the condominium's annual expenses. If the balance is below that, check the minutes for whether the assembly resolved to allocate other income to the fund or an extraordinary levy to top it up. If it did not even do that, the condominium is in breach of the mandatory contribution.
A zero or negative balance, with no extraordinary levy approved to restore it. The assembly can put this right by resolution — allocating income or an extra levy to rebuild the fund. Check the most recent minutes for whether that decision was taken. If the fund is empty and no assembly has decided to replenish it, any extraordinary event in the building forces an urgent levy — with the strain and delay that entails.
Movements out of the fund for current expenses. Every outflow from the fund should be referenced to an extraordinary work approved at assembly. If there are outflows for cleaning, electricity or routine maintenance, it is unlawful.
The fund held in a shared current account, not ring-fenced. Good practice (not mandatory, but defensible in court) is to keep the fund in a separate bank account, identified as such. Mixing monies raises the risk of misuse and makes auditing harder.
Checklist — 12 points to audit before the annual general meeting
Before voting to approve the accounts, work through this list. Each item comes from the warning signs above and is verifiable from the four documents. It takes 30 to 60 minutes with the documents to hand.
Decision criterion. If three or more points fail, it is reasonable to ask for written clarification before voting on approval. If six or more fail, there are grounds to refuse approval and to make a formal request for further clarification at the meeting. Approval subject to reservation is also valid — it is recorded in the minutes and protects the condominium in any future dispute.
A detail that changes everything
Points 10 and 12 of the checklist are particularly telling about a management culture. In traditional models, consulting the documentation means travelling to the office during business hours, asking, waiting, coming back — operational friction that can stretch over days and, in practice, discourage the periodic scrutiny it makes sense to carry out. In modern models, each owner has 24/7 digital access to their file: accounts, minutes, contracts, work orders, ongoing matters, bank statements made available month by month — not only at the close of the year. Consulting no longer depends on opening hours; it becomes a right exercised in seconds from a phone. When you assess your condominium's annual accounts, look also at how access to information is organised — it says as much about the management model as the numbers themselves.
If you find problems — what to do
Spotting a warning sign does not immediately mean bad faith on the administrator's part. It may be an accounting error, a lack of method or disorganisation. The right step is always the same: ask for written clarification before escalating. By email, with a reasonable deadline to reply (10 to 15 working days), framing the question concretely around the checklist point that failed.
If the reply is evasive or absent, the next step is to raise the question at the assembly, have the answer given recorded in the minutes, and ask for a copy of the supporting documentation for later analysis. If at this stage the documentation still does not appear, there are grounds to refuse approval of the accounts or — as a last resort — to remove the administrator. In Portimão, Lagos and Lagoa, Condoarade delivers regular operational coverage directly and can support that transition, as we explain in our guide on changing your condominium administrator. For buildings outside these areas, the Condoarade Digital Administration covers the whole legal and financial component, with the operational component assessed case by case.
See how we manage
If this exercise has you thinking about your building in Portimão, Lagos or Lagoa, book a 30-minute diagnostic call by video, directly with Amílcar. We show you how Condoarade works — a narrative Management Report and Accounts, seven self-standing financial pieces sent out with the notice of meeting, a digital platform with 24/7 access, bank statements month by month, direct contact with the team. No cost, no commitment.
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