Tag Archives: accounting

Interviewing a Florida Community Association Management Company: Part 2

Posted on January 28, 2014 | 10 Comments

On January 2, 2014, I posted a discussion of five key questions to ask a potential management company. Click here to review that post. Today, we will look at five additional questions.

1.     Do you have specific vendors that you work with? Do you receive any type of compensation for recommending specific vendors to Boards?

As one of your property manager’s key responsibilities will be selecting vendors to provide work proposals to the Board, it is important to understand how specific vendors are chosen. Often management companies have lists of preferred vendors that they use regularly. There is nothing inherently wrong with this. In fact, having a manager with experience and strong connections to local vendors is an asset. That being said, the Board should do their best upfront to ensure there are no potentially unethical reasons why a manager may recommend a specific vendor. Conflicts of interest may exist if a manager receives any type of compensation (e.g., cash, professional recommendations, networking opportunities) in exchange for using a specific vendor. A common example of a conflict of interest is key players of a management company having ownership interest in plumbing, maintenance, landscaping or other businesses that an association may hire. A more blatant example would be a management company receiving financial kickbacks from a vendor if a Board hires the vendor. Quite a bit of light has been shed on these conflicts in recent years and management companies have been cleaning up their acts. Still, it is worthwhile to ask the question and judge the manager’s response.

 2.     Do you have a set minimum threshold for competitive bidding? Are you comfortable with the Board setting a lower threshold than is required by Florida Statutes?

Florida Statute Chapter 718.3026 requires that any project costing more than 5% of the annual budget be competitively bid. Given this, most management companies do not promise competitive bidding below 5% of the association’s annual budget. For a condominium with an annual budget of $100,000, only projects of $5,000 or more would be competitively bid. For a large condominium with a budget of $500,000, only projects of $25,000 or more are required to be competitively bid. In my opinion, 5% is way too high of a figure. I strongly recommend that Boards vote on a lower threshold project size above which competitive bidding is required ($1,000 may be a good starting point). Further, I recommend that Boards confirm with potential management companies that they will honor the lower threshold. More competitive bidding means more work for the manager so the manager may want to adjust their management fee slightly to reflect this lower threshold.

NOTE: It is also worthwhile for the Board to establish a maximum expense amount that the manager may approve without Board consent. Ask the manager what they typically recommend. It often makes sense for the competitive bidding threshold and the manager approval threshold to be the same.

 3.     Will you be on property to oversee large projects (e.g., painting, paving)? Is there a fee associated with this oversight?

Unless your association has an on-site manager, most management company contracts only guarantee that the property manager will be on-site once per week for 1-2 hours to complete a property inspection. During big projects like painting and repaving, the limited on-site presence of the property manager can leave the Board struggling to meet vendors, review progress, manage parking and traffic patterns, and much more. Many management contracts include a project administration fee (typically 2-5% of project cost) that includes more comprehensive oversight of large projects. This fee is often automatically charged for any projects above a certain dollar amount. Be sure to confirm whether or not there are any additional fees associated with the administration of large projects and clarify what that fee includes. Regardless of whether or not the manager charges a project administration fee, be sure to ask the manager to explain how he/ she will handle a large project that the association expects to take in the near future. This discussion can provide vital insight into the manager’s project management style.

4.     Are you comfortable following Board-approved policies?

As is likely clear to those that have read my other posts, I am a strong believer in Board-directed property management. In practice, this translates into Boards drafting and approving policies and procedures for everything from violation identification and fining, to delinquent maintenance fee collections, to rental or sales applications, to the types of door hardware unit owners may choose for their front doors. These polices create a road map for managers to follow and provide obvious metrics against which the Board can review a manager’s performance. These policies also ensure that the manager is acting within the guidelines of the association’s governing documents and that all residents receive consistent treatment.

Most management companies have their own internal policies, particularly relating to maintenance fee collections and violation identification/ fining. They tend to use these same policies and same form letters for every community. For example, the manager’s internal policies may dictate that if a unit owner is more than 90 days past due in paying maintenance fees they are automatically sent to the association’s attorney to have a lien placed on their unit. This may be what the Board prefers. On the other hand, the Board may prefer a different approach (e.g., attempting to work out a payment plan or attempting to garnish rent from a tenant before placing a lien). Because their processes are streamlined and generally applicable to all properties they manage, certain management companies may be reluctant to change their policies for your community. If you are the type of community that wants control over how the day-to-day operations of the association are handled, be sure that the manager is willing to follow all of the Board’s policies and procedures. If you are unsure of how important this is to your Board, consider asking the manager for a copy of their internal policies and reviewing them to determine if they are in sync with the Board’s perspective.

5.     How big is your accounting team? What are their qualifications?

As all management companies offer a standard accounting package, many Boards tend not to focus on this aspect of a potential management company. Given the importance of quality bookkeeping, I strongly recommend that the Board take the time to learn as much as possible about the manager’s accounting team. Ask specifically about the size and qualifications (any CPAs on staff?) of the accounting team. Further, request draft financial statements and confirm that the manager is willing to provide customized accounting reports at the request of the Board. Lastly, confirm that the Treasurer of the Board will be able to deal directly with the accountant(s) assigned to your association.

 

As always, feel free to comment below or shoot me an email.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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Florida Statute 718.111(13): Everything You Need to Know About the Florida Condominium Association Year-End Financial Reporting Requirement

Posted on January 27, 2014 | 54 Comments

As it is January once again, it is time for condominium associations to produce their year-end financial reports.  As discussed in our post on accounting records, every condo association must produce a year-end financial report of some kind. The type of financial report required depends on the annual revenues and/ or the size (i.e., number of units) of the association. This blog post will review the specific requirements outlined in the Florida Statutes and the Florida Administrative Code (FAC) relating to the preparation and distribution of the year-end financial report, provide guidance on contracting for or completing the reporting requirements, and discuss voting to waive the year-end reporting requirement.

The Year-End (“YE”) Financial Report

 Per Florida Statute 718.111(13):

  • An association that operates fewer than 50 units, regardless of the association’s annual revenues, shall prepare a report of Cash Receipts and Expenditures.
  • An association with total annual revenues of less than $150,000 shall prepare a report of Cash Receipts and Expenditures.
  • An association with total annual revenues of $150,000 or more, but less than $300,000, shall prepare Compiled Financial Statements (“Compilation”).
  • An association with total annual revenues of at least $300,000, but less than $500,000, shall prepare Reviewed Financial Statements (“Review”).
  • An association with total annual revenues of $500,000 or more shall prepare Audited Financial Statements (“Audit”).

Report of Cash Receipts and Expenditures

  • Must report cash receipts and disbursements from each of the Association’s operating and reserve accounts.
  • Must report cash receipts by classifications at the association’s discretion (e.g., Maintenance Fees, Special Assessments, Late Fee & Interest, Fines, Rental Income).
  • Must report cash expenditures by the following classifications: Security, Profession and Management Fees, Taxes, Recreational Facilities, Refuse Collection and Utilities, Law Care, Building Maintenance, Insurance, Administration/ Salary and Reserve Contributions by Reserve Account. While these classifications are specifically listed in the statute, they are not all inclusive and the association may add any additional classifications they feel are relevant.

Per Rule 61B-22.006 of the Florida Administrative Code:

Compilations, Reviews and Audits must be completed on an accrual basis according to Generally Accepted Accounting Principles (GAAP). Further, Reviews and Audits must be completed by a Certified Public Accountant (interestingly, a CPA is not specifically required for Compilations).

This report must include the following financial statements:

  • Accountant’s or Auditor’s Report
  • Balance Sheet
  • Statement of Revenues and Expenses
  • Statement of Changes in Fund Balances
  • Statement of Cash Flows

Notes to the financial statements must include the following reserve funding disclosures:

  • The beginning balance in each reserve account.
  • Total additions to each reserve account.
  • Total amounts expended or removed from each reserve account.
  • The ending balance in each reserve account.
  • Amount required to fully fund each reserve account, or pool of accounts (if using the pooling method), over the remaining useful life of each asset.
  • How reserve items were estimated (typically by a reserve study).
  • The date the reserve estimates were last made.
  • The association’s policies for allocating reserve fund interest (i.e., interest held in a separate reserve account, applied pro-rata to each reserve account, or included in the reserve pool as is the case when using the pooling method).
  • Whether reserves have been waived during the period covered by the financial statements.
  • Any developer converter reserve accounts.

Notes to the financial statements must also include the following other disclosures:

  • How incomes/ expenses are allocated to unit owners (typically by a unit owner’s percentage ownership in the common elements).
  • The purpose and amount of each special assessment (if any) and how the funds were used.
  • The expenses related to limited common elements that are charged to specific unit owners.
  • Disclosures relating to guarantees pursuant to Section 718.116(9), F.S (see the FAC for more details on these disclosures).

Report of Cash Receipts and Expenditures must be completed using a cash basis and must include the reserve funding disclosures, special assessment disclosures and limited common element disclosures listed above.

NOTE: For all YE financial reports, the FAC has specific guidelines for multicondominium associations.

Required Timeframe for Completion and Distribution

Within 90 days of fiscal YE (not calendar YE though most are one and the same) the association must have completed or have contracted for the preparation of the required YE financial report. Within 21 days after the financial report is completed, but not later than 120 days after the end of the fiscal year, the association must mail or hand deliver a copy of the financial report (or a notice that the report is available upon written request) to each unit owner. This must be done without charge to the unit owner. Note that this particular Florida Statute does not allow for electronic distribution (e.g., email, via website) of the financial report. 

Completing The Year-End (“YE”) Financial Report

 A CPA must complete Audits and Reviews per the FAC.  Any qualified accountant may complete Compilations though I would still recommend a CPA. These services can be very expensive ($1,000 – $6,000) so be sure to obtain competitive bids for your YE financial report. Further, be sure that any CPA or accountant the association hires has experience with condominium associations.

If your association’s fiscal year corresponds with the calendar year (January – December), I strongly recommend contracting with a CPA in November or December to ensure the CPA will have time to complete your association’s financial report within 120 days of year-end (tax season typically keeps CPAs very busy). Contracting with a CPA early also helps to ensure the association obtains the best price (CPAs often increase prices for rush projects).

Boards of Directors or associations’ management companies often complete the Cash Receipts and Expenditures report. This report is relatively easy to complete if your bookkeeping has been well kept and you know the rules discussed in this blog. That being said, it is my experience that management companies do not accurately complete this report (particularly the disclosures). Be sure to review your Cash Receipts and Expenditures report in detail before disseminating to the community. We have templates for the Cash Receipts and Expenditures report. Please send me an email if interested. 

Waiving the YE Financial Reporting Requirement

Florida Statute Chapter 718.111(13)(d) allows condo associations to “waive down” their reporting requirement for three consecutive years. What this means is that the membership of an association that is required to have an Audit may vote to complete a Review, Compilation or report of Cash Receipts and Expenditures instead. Likewise, the membership of an association that is required to complete a Review may vote to complete a Compilation or a report of Cash Receipts and Expenditures instead. And so on. It is a common misconception that associations may vote to waive the YE financial reporting requirement all together. This is not allowed.

A majority vote of a properly called meeting of the association’s membership must be obtained in order to waive down the YE financial reporting requirement. This means that a quorum of unit owners must be present at the meeting (either in person or by proxy) and at least 50% of those owners present must vote to waive down the requirement. As a quorum is required to hold the association’s annual meeting, I recommend including the vote to waive down the financial reporting requirement at the annual meeting. This will save the Board the hassle of obtaining two quorums in one year and will save the Association money on printing, envelopes and postage. Specifically, the association may consider including language similar to the following on the limited proxies that are mailed to the membership for the annual meeting:

WAIVER OF YEAR-END FINANCIAL REPORTING REQUIREMENT

I cast my vote to waive the requirement for a <<Compiled, Reviewed or Audited>> financial statement as required by Chapter 718.111(13) of the Florida Statutes and provide in lieu thereof a <<Compiled financial statement, Reviewed financial statement, or Report of Cash Receipts and Expenditures>> in accordance with Chapter 718.111(13) of the Florida Statutes and 61B-22.006 of the Florida Administrative Code.

YES ________ NO ________

This vote is only effective for the current and subsequent fiscal years (e.g., the vote to waive the 2013 reporting requirement must take place in 2012 or 2013).

Per FAC Rule 61B-22.006, the minutes of the meeting during which the waive down vote took place must reflect the number of votes cast to waive the requirement as well as the type of YE financial report that the association will prepare.

I hope this overview has been helpful. If you have any questions, please feel free to comment or reach out via email.

We are pleased to offer year-end financial reporting services (Audits, Reviews, Compilations and reports of Cash Receipts and Expenditures) to all Florida condominium associations through our management and consulting firm, VERA Property Management. Feel free to contact us directly for a quote.

Emily

 Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a full-service community association management and consulting firm.

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Condo Association Reserve Funding: Component Method or Pooling Method

Posted on July 2, 2013 | 43 Comments

Anyone who has been involved with condominium associations knows about reserve funding. Chapter 718.112(1)(f) of the Florida Statutes requires that all associations put aside funds for large future projects such as building painting, roof replacement and any other project expected to cost more than $10,000. The amount of money that the association is going to contribute in any given year to reserves is included in the annual budget and is based on the expected cost and timing of future large projects. As Board members are not generally qualified to determine the remaining useful lives and replacement costs of the various parts of the condominium property, it is imperative that the Association hire a professional engineering firm that will complete a reserve study of the property and provide guidance to the Board. Reserve studies should be updated every 2-3 years to ensure that all estimates are still accurate. There are many different reserve study firms out there but I have had good experiences with Reserve Advisors in the past.

There are currently two different methods used to account for reserve funds. Below I have provided a brief comparison of the two methods.

The first method is called the Component or Straight Line Method. Here are several important things to consider about this method:

  1. Each maintenance project has its own reserve account and annual contributions to each account are determined by taking the current year’s project cost, subtracting the current value in the reserve account, and dividing it by the remaining useful life of the item.
  2. Once money is allocated to a specific reserve account, the Board cannot utilize those funds for any purpose other than that particular project without a majority vote of the homeowners. For example, if the Board has allocated $200,000 to the building painting reserve account based on expected cost, and the project’s actual cost only ends up being $150,000, they cannot use that additional funds for any other purpose. The extra $50,000 would be the initial value of the reserve account for the next time the buildings need to be painted. Likewise, if the project’s actual cost was $250,000, the Board cannot use reserves from any other reserve account to cover the additional $50,000 without a vote of the majority of the homeowners.
  3. Interest earned on reserve funds is kept separately and can be used for any reserve project.
  4. By using the current year project cost, as opposed to the expected project cost at the time of completion, this method does not take inflation into account. For projects that are expected to be completed in 1 or 2 years, this has a limited effect; however, for projects that are not expected to be completed for 15 or 20 years, this can cause an underestimation of the project cost.
  5. Expected interest that the reserve funds will earn is not taken into account in the association’s budget. If your association has material reserve funds, annual interest earned can be a material amount of money which, when using the component method, cannot be included in the reserve contribution calculations. Therefore, in essence, homeowners have to contribute more (the amount of interest earned annually) to the reserve accounts annually under the component method than they would if interest could be taken into account.

The second method utilized is called the Pooling or Cash Flow Method. Here are several important things to consider about this method.

  1. This method is similar to the component method; however, instead of having individual reserve accounts for each project, there is one pool of funds that can be used for any reserve project.
  2. Inflation is taken into account. For example, if a project is scheduled for two years from now, the current estimated cost of the project is $100,000, and annual inflation is expected to be 1%, then this method would require that the reserve pool have $102,010 available two years from now to complete the project. This is calculated as follows: $100,000*(1.01)^2.
  3. Earned interest is included in the reserve pool and anticipated future interest is taken into account. For example, let’s say that the reserve funds are held in a money market account with a .5% annual interest rate. If the pooled reserve account currently has $300,000, annual interest could be roughly estimated at $1,500. This is $1,500 that does not need to be contributed to the reserve pool from maintenance fees.
  4. Reserve studies anticipate property projects thirty years into the future and provide a schedule of annual reserve contributions for each of those thirty years. These schedules are set up to increase by no more than the estimated rate of inflation annually.

The following is an example that shows how the component and pooling methods would work in the same situation. Let’s assume the time has come to replace the roofing on all of the property’s buildings and the reserve account for this project has $250,000. Let’s also assume that the total amount of reserve funds for all projects is $750,000. If the actual cost of the project is $300,000, under the component method, the Board has several options. (1) The Board can wait to do the project until there is $300,000 in the roofing reserve account. If the roof replacement is urgent due to leaking or other issues, this may not be a feasible option. (2) The Board can issue a special assessment on the unit owners to make up the $50,000 deficit. (3) The Board can wait until the following year and increase maintenance fees substantially to make up the $50,000 deficit. (4) The Board can have a homeowner vote to take $50,000 from a different project reserve fund. This 4th option would require at least 51% of the homeowners to vote. Under the pooling method, the Board would be able to pay the $300,000 out of the $750,000 total reserve funds to complete the project in a timely fashion. The Board would then need to determine how to earn back the extra $50,000 that was used for the roofing project over future years. This could be done through an increase in reserve contributions in future years or, if lucky, another reserve project(s) will cost less than estimated. In the end, the pooling method provides significantly more flexibility to the Board and allows for more efficient project completion. However, it is also possible that the Board could decide to approve a $400,000 roofing proposal even though only $250,000 has been allocated for this project and, in doing so, could set up the community to not have enough funds down the road to complete the next big reserve project. In this case, a special assessment may be required which puts and unfair financial burden on the current homeowners.

So which method is right for your community? That decision is up to the homeowners. In order to switch from the component method (the method the majority of associations use) to the pooling method, a majority vote of the membership is required. If you are considering a switch to the pooling method in your community, there are several things to consider:

  1. When was the most recent reserve study completed? You should obtain a current reserve study using both the pooling and component methods to compare the required annual reserve contributions (typically the component method calls for higher contributions as it is the more conservative approach). If you are trying to avoid an increase in maintenance fees, switching to pooled reserves may help in that effort; however, this should not be the primary factor when deciding whether or not to switch to pooled reserves.
  2. Is the current Board fiscally responsible? Will future Boards be responsible with reserve funds? Pooled reserves allows the Board much more flexibility in reserve spending and, in the case of an irresponsible Board, this can lead to overspending.
  3. Is there a Board member that is comfortable enough with Excel to take the thirty year reserve schedule and adjust it based on actual project costs, changes in interest and inflation rates, and/ or changes in annual reserve contributions? This is very important because before a Board can decide if they should spend more on a particular project than estimated, or if they should complete a project sooner than anticipated, the impact on the reserve pool and future reserve contributions will need to be analyzed. You may be able to have the engineering firm that completed your reserve study complete this analysis for you but there would likely be a fee involved.
  4. How many reserve projects does your property have coming up? If you have a large property with many reserve projects, pooling reserves may benefit your community. Let’s examine why. Large communities may have one or two reserve projects annually and maybe more on rare occasions. If the community uses the component or straight-line method, they can only look to the reserve account for that particular project, and the earned interest account, when determining how much they can spend on that project. If the Board does not have sufficient funds in these accounts to complete the project and they don’t want to use operating funds or issue a special assessment, they may want to use some funds from a different reserve account (one that they think is overfunded or one that has funds remaining after a recently completed project). In order to do this, they would need a majority vote of the membership. Given that the estimates used to determine how much should be reserved for each project can often be inaccurate, it is possible that the Board could need multiple votes of the membership each year to move money between accounts in order to complete reserve projects. If your community is very active and obtaining a majority vote of the membership is easy to do, then this is no problem. However, in many communities, convincing a majority of the homeowners to submit a limited proxy can be a very time consuming task.

This post only serves to provide a brief overview of reserve funding methods. If you need any assistance in determining what the best path is for your community, feel free to email me.

Emily

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Florida Condo Association Accounting Records: Fl Statute 718.111(12)(a)(11)

Posted on June 27, 2013 | 46 Comments

As promised in the discussion of condominium associations’ Official Records, we have dedicated a post exclusively to the accounting records that are required to be maintained pursuant to Florida Statute 718.111(12)(a)(11).

 All accounting records of a condominium association must be maintained for at least 7 years. To be prudent, an association may decide to keep all association records since developer turnover. If your property does not have a lot of storage space for hard copy records, there are many companies that specialize in scanning records electronically and/or storing hard copy records. These services are relatively inexpensive and serve to both reduce clutter and protect the association’s records from fire, theft, or natural disaster.

Most professional management companies use high-end accounting software to maintain the bulk of their associations’ accounting records. This software can cost thousands of dollars so purchasing software like this doesn’t make much sense for the self-managed condominium. For very small condominiums, a program such as excel can be used to maintain the association’s financial statements, including homeowner ledgers. However, for larger condominiums, accounting software such as QuickBooks, which costs in the $300 range, likely makes the most sense. As I have mentioned in previous posts, if the Board of Directors does not have a member with a strong accounting background, hiring a 3rd party accountant to maintain the association’s books may be necessary.

Here’s what the FL Statutes say condo associations must maintain:

1.    Accurate, itemized, and detailed records of all receipts and expenditures.

If this seems very broad to you, that’s because it is. The FL Statutes leave it to each condominium to determine exactly what they need to keep, and in what format, in order to meet this requirement. As part of the association’s routine bookkeeping, all monies received and spent will be entered into the association’s accounting software. Generally, these programs allow the user to enter a description of each deposit or expense. Be sure to enter detailed descriptions for each entry including the parties involved and the reason that the funds were received or paid. You’ll thank yourself for doing this the first time you try to look back at specific transactions from previous years. Further, I strongly recommend you keep all of the following either electronically or in hard copy:

  • Copies of all checks received and written by the association
  • Copies of all monthly bank statements for all association bank accounts
  • Copies of all “lockbox” payment detail if this service is used by the association
  • Copies of all final invoices paid by the association (typically these invoices are kept with the copy of the check that paid the invoice)
  • Copies of all reconciliation reports (showing that the bank statements and the association’s bookkeeping reconcile each month-end)

2.    A current account and a monthly, bimonthly, or quarterly statement of the account for each unit designating the name of the unit owner, the due date and amount of each assessment, the amount paid on the account, and the balance due.

This refers to the balances owed by each homeowner for their maintenance fees. This information should already be maintained in the association’s accounting system and there is nothing else special that needs to be done. These balances should include any accrued late fees or interest. I recommend you keep any other amounts owed to the association (e.g. fines, charges backs for work completed by the association on behalf of the homeowner) on a separate ledger for each homeowner as the association may only lien and foreclose on a unit for past due maintenance fees (and associated late fees/ interest). This makes it easier for the association to provide accurate account balances to the association’s attorney (during collection efforts) or prospective buyers. Along with this requirement, I recommend that the association maintain monthly A/R aging summaries (showing those units that are 30, 60 or 90 days past due).

3.    All audits, reviews, accounting statements, and financial reports of the association or condominium.

What an association must maintain specifically under this requirement depends in large part on the size of the association. According to Florida Statute 718.111(13), each association must produce a year-end financial report (or have contracted for the production of this report) within 90 days of fiscal year-end. The type of report required is as follows:

  • An association that operates fewer than 75 units, regardless of the association’s annual revenues, shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
  • An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare GAAP compiled financial statements.
  • An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare GAAP reviewed financial statements.
  • An association with total annual revenues of $400,000 or more shall prepare GAAP audited financial statements.

Details on how to prepare the above financial report are provided in Rule 61B-22.006 of the Florida Administrative Code. The Florida Statutes allows the voting interests of the association to approve a waiver of compiled, reviewed or audited financial statements for up to three consecutive years.

Along with the above described report, I recommend that the association maintain copies of balance sheets and income statements for each month-end that have been approved by the Board.

4.    All contracts for work to be performed. Bids for work to be performed are also considered official records and must be maintained by the association.

This requirement is relatively self-explanatory; however, there are some simple ways to keep track of all of this information in an organized fashion. I recommend that all long term contracts approved by the association be kept together for reference. It may be helpful to keep a list of all contracts including their maturity dates and renewal/ termination provisions. As mentioned above, all other contracts/ invoices can easily be kept along with a copy of the check that was issued by the association to pay the contract/ invoice. Lastly, all bids that were received for work must be kept as well. I recommend keeping these separate from those bids that were actually approved to avoid confusion.

As was mentioned in a previous post, it is a smart idea to keep a copy of each packet that is provided to the Board at each meeting. These packets typically include all bids related to agenda items so maintaining the packets would comply with the above contracts requirement. These packets also typically include recent financial statements, minutes from the previous meeting, the meeting agenda, and more of the items that are considered part of the official records of the association.

I am available via email if you have any questions or comments.

Ryan

 

Ryan Koski is a condominium homeowner in Tampa, Florida and a CPA and Attorney with Accounting Clinic, Inc. He is also a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

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What does condominium association self-management require?

Posted on June 14, 2013 | 11 Comments

One thing is certain: self-management of a condominium association is no easy task. However, despite what professional management companies and other websites may lead you to believe, it is an achievable one for the right Board of Directors. I’m certainly not suggesting that the decision to shift from professional to self-management should be taken lightly. When considering this, the Board should take the time to discuss the realities of self-management and how Board members will divide responsibility to ensure that the association continues to function properly. Not sure what the realities of self-management are for your community? Feel free to email me and I will gladly discuss with you the specific challenges you are facing.

Each community is different and some are better suited for self-management than others. So, what do you need to successfully self-manage a condominium association? Here are my four absolute musts:

1. Dedicated Board Members

It is impossible to properly self-manage a condominium association without at least two dedicated Board members. Usually, these two Board members will fill the President and Vice-President (or Treasurer) roles. Depending on the size of the community, the President will likely have to be willing to dedicate 15-30 hours/ week handling association issues. The time commitment will likely be greater than that during the first few months of self-management as all of the kinks are worked through. The second dedicated Board member will need to assist the President in handling the daily ins and outs of the association and will also need to serve as back-up in the event the President is unavailable to fill his/ her daily duties. Ideally, these Board members will be retired or will have flexible work schedules in order to meet with vendors and residents during normal business hours.

2. Accounting Experience

One of the most important aspects of condo management is maintaining the financial records of the association. The Florida Condominium Statutes (Chapter 718) have very detailed requirements for record keeping and annual disclosures. The requirements become more sophisticated the larger the association becomes. Further, it will be the responsibility of the Board, among other things, to collect maintenance fees, issue delinquency letters, pay all of the association’s expenses, properly manage the association’s reserves and file the association’s taxes. Given this, it is extremely important that at least one Board member have sufficient accounting experience to maintain the association’s books. QuickBooks is a user friendly and moderately priced accounting system that the Board can use. There are many others available as well. If you do not have anyone on the Board with enough experience to feel comfortable handing the financial records of the association, another option would be to hire a 3rd party (a bookkeeper, accountant, CPA firm, etc.) to handle the financial aspects of the association.

3. An Experienced Lawyer

Without a professional property manager to look to for advice (though in my experience their advice is often incorrect), an experienced condominium lawyer will become the Board’s new best friend. A quality lawyer will be able to handle your collection efforts, answer any questions you have about the FL Statutes or your governing documents (bylaws, declaration, rules & regulations, etc.), review association policies prior to Board implementation, and provide guidance on many of the other issues that are certain to arise.

4. Communication Skills

Last, but certainly not least, there needs to be at least one Board member with solid written communication skills who will be willing to draft emails to the community, send out newsletters, answer resident complaints/ questions, etc. Do not underestimate the importance of this factor. One of the most common complaints I hear is that information is not well communicated to residents. Lack of communication on important issues can create frustration for residents and this often leads to threats of lawsuits or other action when residents are unhappy with a decision that the Board has made. Detailed and timely communication helps to keep residents satisfied which, in turn, makes running the association that much easier.

If your Board meets the above four criteria, then you are likely well poised to self-manage your condominium association. As always, I am available via email to discuss any questions or comments you have.

 

Emily

emily@flcondoassociationadvisor.com

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