Financial Stability Needed

As a member of your Condominium Association’s board of directors, you are responsible for maintaining the financial health of the community. Keeping your Condo Association financially sound involves much more than just paying bills on time. Important tasks include creating the budget and tracking financial reports to ensure there are adequate funds for daily expenses, future projects, and repairs. While it can seem overwhelming, there are ways to stay ahead with your finances and keep your community in good standing. Below are five tips for keeping your COA expenses – and income – in order.

(1) Regularly Review All Financials

In order to get a clear picture of the Condo Association’s monetary position, the board should regularly review all financials. This includes the records that highlight key economic information for the Association (e.g., balance sheet, statement of income and expenses, general ledger, cash disbursements ledger, an accounts payable report, account delinquency report, and any bank reconciliation records). These documents will indicate the financial health of an Association and inform board decisions, so it is crucial to review them on a monthly basis.

• The income statement and balance sheet balance out to zero – no more or less.
• There is no decrease in the amount of cash on hand.
• There are no variances between expenses vs. budgeted items.
• Vendors are getting paid the agreed-upon amount.
• There are sufficient funds in your reserves for any capital improvement projects.
• There is no increase in owed bills or assessments.

By consistently reviewing where the Association’s money is coming from and going to, you will minimize the impact any surprises may have on your Association.

(2) Assess Services for Effectiveness

Review your community’s services and evaluate how each vendor delivered on those services. You may find that some services are ineffective or unnecessary, eliminating additional costs. Check to see if any vendors are running promotions or referral specials, review all the contracts, and confirm your Condo Association is getting the services it needed while paying a competitive price. If you find any discrepancies or are not satisfied with the services rendered, it doesn’t hurt to consider sending those services out for bids, and see what other vendors can offer. However, don’t be blinded by a great estimate – if a vendor quotes you at a price that sounds too good to be true, it may very well be. Take into account their work history, customer service skills, and references.

(3) Collect Dues

While most homeowners realize there is a regular assessment, collection efforts can sometimes get challenging. However, this money is crucial to effective operations, and letting even a couple of delinquencies slide by will disrupt your Condo Association’s entire budget. What’s more, ignoring non-payments can lead to special assessments or even legal trouble. To protect your community’s funds, you must be diligent in collecting dues routinely. Here’s how you can keep homeowners accountable:

• Educate homeowners on what their assessment goes to and why they must pay it.
• Share the annual budget with homeowners.
• Regularly monitor assessments – pay attention to who’s paying, how regularly, and how much.
• Clearly communicate due dates, due amounts, past-due dates, and past-due amounts.
• Identify where and how homeowners can access information about their assessment.
• Establish a designated person, such as a Community Manager or Treasurer, who homeowners can contact for payment questions and concerns.
• Enforce collections and payment policies consistently.

(4) Partner with a Certified Public Accountant (CPA)

Regardless of size, every Condo/HOA needs a certified public accountant (CPA) to stay on the right course. Even though a CPA’s primary function is to prepare tax returns, they can also use statements and reports to formulate a high-level snapshot of the Association’s finances. Additionally, CPAs may provide a basic analysis of HOA financial statements or conduct an audit, confirming documents are 100% accurate and error-free.

Make sure your CPA has experience with HOAs, comes recommended, and understands the unique tax criteria of a Condo Association. Having a CPA by your side will not only confirm accuracy in accounting practices, but also increase efficiency.

(5) Perform an Annual Audit

Some states and HOA bylaws require annual audits, as it’s the highest level of review for a Condo Association’s financial books and records. It is designed to provide reasonable assurance that financial statements prepared by the treasurer, management company, or bookkeeper are presented fairly, in the best interest of the Association, and in conformity with the American Institute of Certified Public Accountants’ (AICPA) General Accepted Accounting Principles (GAAP).

An audit will:

• Identify weaknesses in accounting procedures.
• Trace transactions to any supporting documents and authorizations.
• Review association minutes and legal documents.

An audit indicates any issues concerning financial management, and an auditor will make suggestions for how to amend procedures and improve an Association’s financial management operations.

Budgeting Best Practices

As a board member, it is your duty to guarantee that the financial interests of your Condo Association are safe and beneficial to the community going forward. To help your community maintain a balanced budget, keep these tips in mind in order to stay on top of your finances and manage your communities successfully.

Let us know what tips you think COA’s could use to better balance their financials by emailing info@myardent.com.