Understanding Your Condo's Finances Education and Professional Advice Help Boards Handle Budgets

Management of a condominium community is much like democratic government in a small town or village. The budget process is remarkably similar, whether it’s fees or taxes being collected, and, as in local government, financial management is a transparent system based on “GAAP” (generally accepted accounting principles).

For both towns and private communities, financial stability is essential to the shared goal of all residents – that goal being short- and long-term maintenance of commonly-owned buildings, grounds and infrastructures. And just as town residents must vote on how their taxes are spent, condo owners have control over managementof their pooled finances.

How involved in the budget process do directors or officers need to be, andhow much do they need in the way of financial knowledge?

Helping the CPA

Mark Love, CPA, a principal in the Worcester, Massachusetts-based accounting firm Love, Jarominski & Raymond, LLP, says, “They [board members and trustees] take their role seriously and they are very prepared. We’re finding that boards are [becoming] very strong – the members are notafraid to ask questions. This may be because [so many] condo buyers now have had previous experience with owning a home. These are the people who are scaling down,” he notes.

“The best-run condo associations are those that have good property managers… a strong manager really engages the board members. And it helps to have at least one volunteer (board) member with an acute understanding of finances,” says Love.

Read More...

Related Articles

Financial Record-Keeping

Following the Money

Spotting Financial Irregularities

Red Flags Every Board Member Should Know About

Minding Your Money

Boards Must Be Alert for Financial Shenanigans

 

4 Comments

  • You fail to discuss the tracking of special assessments. (Construction projects that are funded by special assessments) Don't want these funds co-mingled with other funds of association. What separate bank accounts for each fund, with unique monthly reports for each fund.
  • I am happy with your article. Herein it is stated that a financial statement is presented at the end of the year ( budget), ahead of time so that the condo owner has time to orientate himself with past expenses. Our board does not hand out those financials until the time of the meeting. And should I asked sometimes during the year for a print out, I get angry denials. Do I have the right to those print outs?
  • how can the year balance in the operating budget be use and it be carried forwarded for use in years ahead ?
  • We had our annual meeting last night and except for one member it was unamous to raise the monthly rate $25. First raise in 5 years. This member, also on the board, does not want the raise in monthly fees. We put 11% into reserves and we have this month 11,000 in checking account. At the end of the year we will have about 8,000 left in checking account and 29,000 in reserve. This person wants us to use the $8000 to offset the 25 fee increase. We want to have the extra in the checking account so when some small problem pops we just have it fixed with no problem putting an assessment on. We are 23 units and keep up the place very well. The fee was $175 for 5 years and we increased it to $200. According to bylaws we either have to spend it, put it into reserve or refund it to owners. Any help? Basically we all get along. All volunteers on board. Have very few expenditures besides operation of association. I would say less than $250 besides the following: Snow removal Landscaping Insurance Reserves 11% of fees. Irrigation, water, sewer tax on irrigation. Maintainance on buildings. Pest and weed control on the seven buildings This year we spent almost $8000 on water for the lawns. Would appreciate any help. We know we can put it into reserves and use it when needed but want to just leave it in checking account as we have in past.