In The Black Explaining Common Condo and Co-op Budget Terminology

Taking care of a condo, co-op or HOA’s budget and finances is a big job. Handling such large sums of money is an important responsibility, and not every unit owner or shareholder has the expertise to do the job well. Sure, most people know that the amount of money going out shouldn’t exceed the amount of money coming in, and people with even a small amount of financial experience know the difference between the capital budget and the operating budget. 

But it’s much more complicated than that. And because it is so complicated, running a community's books often becomes a joint effort, involving the board, manager, account and others. It’s important to get anyone who has any relevant expertise into the mix and part of the process is knowing some basic terms and concepts that apply to multifamily communities, whether condo, co-op, or HOA. 

First Things First

First, let’s look at some of the main components of a typical condo or co-op building’s financial profile. According to Richard Montanye, CPA, a partner at the Long Island-based accounting firm of Marin & Montanye, LLP, these include working capital position, available cash, capital reserves, long-term debt and budget status.

Because a board or building administrators look at a building’s financial statements to see if there is adequate money for projects, there should be a “floor” for reserves. “We use about $2,000 per unit as a minimum reserve fund,” says one financial professional. “You might have $200,000 and a $100,000 reserve fund, but you can’t really spend all that money.”

Much of the needed information can be found in the co-op, condo or HOA development’s financial statements. These include the balance sheet (reporting assets and liabilities); a statement of revenues, expense and accumulated surplus or deficit; the statement of cash flows (a reconciliation of the balance of cash at the beginning of the year to the balance at the end of the year); notes to financial statements and more.


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