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Doug McLain wanted to expand the opportunity to provide highly effective but fairly priced audits to condominium associations in Oregon and Washington.  I was honored he asked if I would join him on this new adventure.  We officially spun off from Currie & McLain CPA’s, focused on providing audit and review services primarily to condominium and homeowner associations.

We officially kicked off on September 1 with the new company and immediately started to set up our condominium audit processes.  Since we are looking for new ways to leverage technology to provide us better audit results while also reducing time and cost, every step, every procedure, is evaluated to make sure it fits our model.

It is now November and we are into the exciting part of marketing to condominium and homeowner management companies so we can be informed when a board wants to receive a proposal for audit or review services.

We will explore various topics relevant to condominium associations, financial management and what board’s of directors may want to look for when evaluating their financial statements and reserve studies.

We would like the opportunity to discuss how we can be of help to your condominium and homeowner association.  Feel free to write us at info@core-acct.com or visit our website at http://www.core-acct.com.

C.O.R.E. Services, focused on helping stakeholders rely upon management.

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Performance Obligations in ASC 606 for Condos

We received a question from a concerned treasurer the other day, can they get by with only one performance obligation for their condominium association GAAP financial statements?

The answer is most likely yes, but with a catch.

Remember, you must analyze your contract with your customer.  And this is where things start getting tough for an association.  You have CC&R’s, you have bylaws and articles, you even have rules and regulations. But you likely will not find a single reference to a contract between the condo association and the unit-as-customer.

You might think that, because there isn’t a written, or explicit, contract, that you can avoid ASC 606 in its entirety.  Not so fast.  FASB recognized that this might be a response and requires you to look at your relationship with those who pay you money and find a contractual relationship; that is, an implicit contract.  Your association therefore has a contract between the association and the unit-as-customer.

You as a board can now shrug your shoulders and ask, “Ok, now what?”

Now is the hard part.  You have to explore, what exactly are the promises, commitments, obligations and other things you are offering your unit-as-customer in exchange for the money paid in the form of assessments?  Write them down.  Compare notes.

If you all only have only one line item on the page and it is the same item, you are done.  Congratulations, you have a single performance obligation.

Oh, you have a longer list?

Well, can you logically group some or all of those items into a bundle of services with similar results and expectations?  Can you get that list down to one group?

If you can, your board is done.  You have a single performance obligation.

This is the part we struggle with.  Can your association realistically claim that it is offering to the units and unit owners, in exchange for their assessments, the single performance obligation of “making everything be ok”.

There are practitioners who say they have found a way to group everything together into a single performance obligation, similar to the way we would bundle the various subcontractor services for constructing a building.   Possible but I think the comparison is weak.  The building cannot go up without the drawings and the engineering… so the customer is paying for the bundled service.  Even if you line item the invoice, the customer agreed to buy a building, not a set of separate services.

This isn’t so with an association.  First, your unit-as-customer doesn’t have a choice.  What your unit-as-customer faces is a tax, a levy, by another name: Assessment.  Or perhaps you made it sound exclusive by calling it membership dues.  Regardless, there is no true vendor-customer contractual relationship between the association and the unit owner since membership is a requirement for buying in.

Second, most of you manage your budget on a detailed basis.  If one budget item goes over you have to agree to move funds to cover it; or call for a special assessment to collect on the shortfall.  This might imply that you determined that is a separate performance obligation with its own separate revenue source.

Because the association is not in this with a profit motive in mind; it is there to negotiate certain services, collect funds from the owners and remit those funds to the providers of goods and services, we have a conceptual problem in identifying exactly what is the supposed contract.  In essence, what we really have is a quasi-governmental agency with governmental powers to tax and spend.  It has a useful purpose but it is hardly a contract between the association and unit.  But that opinion is not shared by those who write the rules… so off we go.

Professionally, we come down on the side of the budget-as-contract.    Some may disagree – that is their right.  The budget though, is the only thing that is really even close to negotiated between the association and the units-as-customers.  The association says it needs so much money to pay bills and accumulate resources for Murphy’s accidental showings and for the inevitable need to repair and replace those things which every unit owns in common.  The owners don’t disagree (notice I didn’t say agree, most laws are changing to where a super majority of owners must show up and veto a budget or it is assumed to be accepted.  Nice isn’t it?) so you have a conceptual meeting of the minds.

The budget has dozens or even hundreds of line items.  Most can be grouped into categories; likely under 10 groupings for even the most complex condominium association.  Taking these groupings down to 1 is the problem.

So, now that I have meandered all over the place in trying to defend the answer, I hope you can see how challenging ASC 606 can be.   You have to do the hard work of understanding the relationship between your association and your units-as-customers.  You need to identify how those relationships impact the money you charge to the units-as-customers.  Once you have identified those, the rest is easy.

At C.O.R.E. Services, we focus on preventing and detecting fraud so that owners can have confidence in their board. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to rooting out the risks of fraud. Our services are designed to help the board and owners rely upon their accounting and financial statements to help with the decisions surrounding their community and home. You can find more information about us on our website.

 

Boards do hard work, they shouldn’t work hard

By focusing on Money Matters within condominium associations, we being to see all sorts of opportunities to help boards smooth out the decision-making process.  To us, there is nothing worse than the board doing management’s job, while paying management.

Over the weekend, I assisted the secretary in finalizing the minutes.  The secretary was concerned because another board member (who was the past secretary) told her how to do the minutes.  The minutes would typically run for 5 or 6 pages, attempting to capture all the conversations.  I recommended striking the additional comments and focus on the motion and its approval (or failure).

She asked if she could send it on to the past secretary director for her take as she was her mentor in the role.

I then assisted the treasurer with the monthly report.  I summarized some of the detail and put it into a 5 page Powerpoint presentation.  I pdf’ed the necessary monthly reports and sent them on.  The treasurer said that it was great, but he was used to filing out the excel template that a past treasurer (surprise, the same past secretary and also past treasurer) had put together.  He asked if he could forward it onto the past treasurer.

It wasn’t four hours later that there was an email blast from this director.  To the board and to me.  She didn’t take kindly to me undoing all of her ‘hard work’ and the training she put into these new officers.  And further, all communication should be to all board members in the spirit of ‘transparency’.

This board is already meeting twice a month for 3 hours each meeting.  There are hundreds of emails floating between the board members.  Each email takes a few minutes to process.  The treasurer was rewriting the financial statements which took about 8 hours of his time.  The secretary was spending several hours going through notes and transcribing them to get to the minutes.

By my very rough calculation, the board is working between 10 and 20 hours per month.  This is the definition of working hard.  It is also nuts.

Management creates a financial statement.  If you as treasurer don’t like it and don’t want to tell management to create something different, by all means invest your time in creating a pretty picture which is meaningful to your board.  But don’t spend more than an hour.  If you have to work that hard, then you either don’t know what you are doing and need help or things are reported so poorly that you need help to figure it out.

The minutes are a record of a board’s decisions.  It isn’t meant to be a complete recording of the meeting.  If you want that, hire a court reporter or record the meeting.  Detail the motion, identity the second and record if it passed or failed.  While the debate can be entertaining, it is not a part of the official record.  And neither are owner comments, by the way.  Keep your minutes clean and to the point.

All of this additional work really puts a strain on board members.  And owners who show up start seeing how much time has to be invested and they go “no way!”  That isn’t healthy for your association either.

If your association seems to require lots of time commitment, then perhaps you need to rethink your board meeting process.

  1. A ‘board briefing book’ should be emailed out to the directors a week in advance of the meeting.  It should
    1. The agenda
    2. Proposed motions by board members
    3. Supporting reports from committees and management
    4. Proposed resolutions
    5. Additional research as necessary to support a motion
  2. The board chair should ensure that a time limit for each agenda item
  3. The board chair should call the meeting to order at the established time
  4. The board goes through the agenda and upon a motion
    1. Stop any debate before the motion is seconded
    2. Do not allow lengthy preambles to the motion
    3. Close the debate once all board members have been heard
    4. Call the vote
  5. Accept written reports from directors and committee chairs
    1. Allow a brief (2 to 3 minute) summary of the report
    2. Allow for a brief Q&A session (5 minutes)
    3. Move on

You can solve a lot of problems in a board meeting, but only if you try and stick to a process designed to get to a vote on those matters.  And whatever you do, don’t try to do the work yourself.  Doing research, getting quotes and scheduling work is the role of management.  You oversee management.  Require them to do carry out their role and not pass it back to you.  If they can’t get new management and set it as a specification to get your business.

At C.O.R.E. Services, we believe Money Matters. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to rooting out the risks of fraud. Our services are designed to help the board and owners rely upon their accounting and financial statements to help with the decisions surrounding their community and home. You can find more information about us on our website.

 

Insurance, Risk and Who Bears Responsibility in your Condo

One of the more challenging aspects of taking over management of condominium associations is the reeducation necessary for boards and owners.  And the area with the biggest pain, and likely biggest reward, is in the area of putting responsibility where it lay.

As we discussed in the last article on repairing damage to units, the misconception is that everyone in the condominium project shares equally.  This is true in general but hardly ever close to reality in the particulars.  It is true, in general, that condos carry insurance on the property.  What is not true is that the condo policy covers the unit owner.  And yet, the three most recent condo projects we took over management for have been using community money to pay for damage which was the responsibility of the unit owner because the unit owner lacked adequate insurance.

Why? You might ask.  The primary reason is that most boards are afraid of the conflict.  Because the board does not want conflict, management avoids conflict.  This leads to those moments where requests for service come in and management dispatches it, receives the bill and pays it – and yet the service itself was not a community expense.

We have two of these situations in a big .  In both cases, the owner had inadequate insurance.  Each association have a $10,000 deductible.  Both cases the damage was less than that amount.  In both cases the board agreed to pay for the damage, even though the association was not a party to the claim. Each had more than $8,000 of community money paid out to benefit a single owner.  Both associations were wrong.

It is no different, by the way, than the situation we confronted in the last article.  For an individual owner, the costs are $8K but when spread out over the entire ownership base, the cost comes to only $60.  Naturally, who wouldn’t want to only have to contribute $60 to repair damage that would otherwise have decimated your finances?

It’s elegant, simple and wrong.

Just because your association likely has the deep pockets doesn’t mean that it should pick up the tab for these items.  Your owners must be held accountable for their own choices.  And that means holding owners accountable for their own insurance coverage – or lack of it.

I am not here to lecture on the concept of risk shifting and insurance.  The point for today is, your association is not the backstop insurance for your owners.  This becomes a slippery slope, where once you are seen as providing cost support for non-insured damage, then every owner will start moving towards less insurance coverage.  Think about it: if that policy costs the owner $2,000 a year and yet they only have to kick in $60 for their portion of the self-insurance, why would they get insurance coverage?  Especially if the risk to them is less than 1%?

Remember, the association’s money isn’t theirs.  Directly.  So what if it costs the association $8,000 to repair insurable damage?  It amounts to that $60 each for the owners.  In the owner’s mind, it is part of the assessment so they don’t give a thought to it.  But as a board member, you need to remember that this $8,000 really isn’t part of the assessments.  If you allow this, you are using funds set aside for community benefit and using it solely to help an individual.  Your community isn’t benefitting.

And yet the chorus will sign at the top of its lungs that you are wrong if you start trying to be sensible about what is, and isn’t community expense.  The community benefits by ensuring that the unit is habitable.  The community has an implicit contract to spread all the costs to everyone who lives there.  The CC&R’s say that the association is responsible for all the costs in common, which includes things like insurance and taking care of the water lines which benefit only a single property.  And here you are, a volunteer, trying to make sense of this and make decisions for the benefit of all, not the few.  But it is hard and so you turn to your manager, who…

gives you that deer in the headlights look and says they will support whatever decision you make but other associations they manage, when faced with this, pay the claim because the board feels it is the right thing to do.

What pressure!

I wish we could make it easy on you.  You are likely facing inertia carrying forward from prior boards making the decision to pay when they shouldn’t have.  You might even be close friends with one of those affected by the claim and who will face a huge hit because their insurance was inadequate.  Or, you might even feel that, like the case from the other day, that the association should pay because the expense is so great that it could bankrupt people and, after all, the association really is responsible for the framing, isn’t it?

But keep in mind, that the association doesn’t really exist, except as a tool to accumulate resources to pay for common expenses.  To pay for damage people believe is not their personal responsibility, you have to assess all the owners – that is, you must assess the owners to cover those expenses.  Or, you can use one of the myriad escape clauses in your CC&R’s which allow you to shift the cost to those who benefit the most from the expenditure of common funds.  But it is tough to do this.

So, here is a suggestion.  You should pool the expenses your condo association incurs which are to the benefit of fewer than all owners.  At the end of the year, the board should call for a special assessment to recoup that money from all the owners.  Tell them that this is the cost of their wanting to socialize all incidental costs of living in a condo community.  It is a compromise that might be palatable to the condo board of directors and some of the unit owners – especially those who benefit.  At least it is not allowed to enter your budget and see a constant, steady increase due to these costs continuously going up.  Perhaps the owners will get sick and tired of the special assessment and demand that these costs stop being paid for by the association.  More likely than not, they will replace your board with new people who will want to simply bury it in the current operating budget – starting the cycle all over again.

At C.O.R.E. Services, we focus on preventing the misuse of association money so that owners can have confidence in their board. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to rooting out the risks of fraud. Our services are designed to help the board and owners rely upon their accounting and financial statements to help with the decisions surrounding their community and home. You can find more information about us on our website.

Question on short term fix versus long term result

On the agenda of a recent board meeting we attended as manager was a matter of importance to the association and the owners: Addressing damage to units caused by a building envelope inspection.  An owner was nice enough to write after the meeting and ask our thoughts.  Since I know that this type of thing impacts more than one association, I thought I would share our overarching view on how this type of thing should be addressed.

As always, names and places have been changed to protect the innocent.

A brief summary.  An association had an envelope inspection performed.  The inspection found instances of dry rot, sadly a very common issue.  Each of the inspected units had varying degrees of damage.  We are not construction experts or lawyers or insurance specialists but from what we know and have learned in our many years of practice, this costs is probably going to be paid for by the owners.  Interestingly enough, the issue which needed to be addressed at the board meeting was:

Deal with the underlying damage and reaffix the siding or do some cosmetic repairs and reaffix the siding.  After studying the documents listed above, our recommendation was to hire a contractor to repair the structures and assess the unit owners for the cost of that repair and then reaffix the siding at the expense of the association.  We believe the unit owner was responsible for a special assessment for the repairs to their particular unit as the CC&R’s had a section entitled “Only Some Units Benefitted”.   This section typically reads something like, ‘any common expenses incurred which benefit fewer than all the units should be assessed against the units so benefitted.’

Since the siding, framing and sheathing are common elements in this particular association (and probably yours), our analysis indicated that the common expense for these repairs would benefit fewer than all units.  Therefore, the repair costs on these common elements should be assessed to the unit owners so benefitting from that repair.

The board listened to our recommendation and after some very hard questioning and deliberation, voted to perform some cosmetic repairs and reaffix the siding and address the dry rot another time.  It was an excellent decision.

Because of this vote though, other matters come into play.  Please keep in mind that these are merely my personal thoughts on the matter as it pertains to the buildings within that particular association. These are not the board’s opinions, thoughts or plans. I am writing based upon our understanding of the association, the various reports, the governing documents and the association’s finances.  But no doubt this may seem all too common and our thoughts might be able to help others as well.

I do not foresee addressing any dry rot issue for several years so it is best to reaffix the siding to eliminate the eyesores. This is not an attempt to minimize the dry rot issue; I appreciate that there is a potential risk here. But the reality is, to address the dry rot completely will likely require substantial work on the structures and there is simply no money for it. The association’s reserve study does not contemplate repair or replacement of the framing, sheathing, insulation and water barriers.  Even if the association were to require owner payment of the dry rot remediation, the association would still need to front the money and there is insufficient reserves on hand to do so – which would require owners to prepay for that. Payment will be in the form of a special assessment.

As we pointed out, the damage and remediation costs could be all over the board – ranging from nothing up to $10,000 or more per building. Given that each unit benefits disproportionately, there is an argument that the CC&R’s section addressing the situation where only some units benefitted should come into play. We do appreciate, however, that this section has not been used, or used extremely rarely, in the past and the results could be considered unfair. But that is the underlying funding issue of where the association gets the assessment dollars; either from each unit owner equally or from each unit owner according to the cost of repairs. While important, this is not the main concern.

The main point to consider is that the money needs to be on-hand to pay for this remediation and it just isn’t there today. And in the ultimate chicken-and-egg scenario, in order to figure out how much each individual owner needs to pay, the association needs to

  • tear open the building;
  • document the extent of the remediation required, both per building and in total;
  • determine how much to assess each unit for the remediation by direct or common assessment;
  • plan for the fact that some owners will not have access to the funds immediately;
  • collect the funds;
  • disburse collected money to the contractor as work progresses.

It is a lot.  And it won’t be solved today.

So, my personal opinion is, as a ‘best case’ scenario, a conceptual plan forming over 3-10 years which will have at its underpinning some sort of annual special assessment to accumulate funds for this. Once the funds are on-hand, work could then begin an analysis made as to which units should pay what proportion of the cost. I say best-case because it is going to be a major undertaking to get buy-in from all the owners to get them to go along. Every community is different and you will know far better than we do  the potential success of such an endeavor but I have witnessed boards be tossed out and new directions charted over even a hint of such a special assessment.

Some could argue that the board and owners have an obligation to fix the buildings now that the damage is known.  Perhaps.  Perhaps not.  What is the definition of “fix”? If the true cost to some owners were $25,000 and they could not afford it, who bears the cost of that remediation?  If it forces multiple owners into bankruptcy, does the association and the remaining owners really benefit from the reallocation of the special assessment to the rest?  These are not easy questions to answer.  And the answer is not a tactical ‘how we name the special assessment’ it is about ensuring that the costs related to individual units are not shared with the community while the gains from the work performed are privatized.  Which, by the way, is the actual reason for those CC&R sections entitled Only Some Units Benefitted.   This is an excellent example of the Tragedy of the Commons, by the way.  Try Wikipedia if you would like to know more about this, or ask your community manager for their thoughts.  I think you will be surprised by the answer.

I do believe, however that an honest question deserves an honest answer, even if it is based upon educated speculation – as I have done here.

Questions, comments?  Please feel free to respond to this article or email us.  We will likely post your response but we will change particulars because frankly the who and where is less important than the what, how and why.

I hope this helps you and your neighbors evaluate the issue. We appreciate the opportunity to be of service to your association.

At C.O.R.E. Services, we focus on money matters so that owners can have confidence in their board. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to protecting association money. Our services are designed to help the board and owners rely upon their accounting and financial information to help with the decisions surrounding their community and home. You can find more information about us on our website.

Board Meeting Dysfunction

Names have been changed to protect the guilty.

We were fortunate enough to be invited to attend a board meeting earlier this month.  We have gotten somewhat spoiled as of late since our current clients have learned what is, and more importantly, is not acceptable at board meetings.

Board meetings are about making decisions, not about bitching.

Three quarters of the meeting was sadly, nothing but complaining.  Complaining about each other, complaining about management – lawyers – accountants – contractors.

This meeting went on for several hours.  They started with fewer than 5 owners in attendance and soon ended with none.

Even though it was late, we asked the board to sit with us a few minutes and allow us to critique the meeting.

  • The power of the agenda.  The agenda drives the meeting.  If there is a report, then the party making the report briefly summarizes their written report and then takes questions.  At a minimum, the board should approve the acceptance of the report.
  • The power of the gavel.  The board chair controls the meeting.  The gavel is a great attention grabber to stop discussion.  It often goes unnoticed until it is too late, but off-topic (and even on-topic but useless) conversations eat up time like nothing else.  The board chair needs to keep the meeting in order and not allow other matters to creep into the meeting.
  • The power of motions.  Motions start everything.  It is a cool word as it actually means to make things move.  There should be no discussion on a topic until there is a motion.  Then, there must be a second.  The second simply means that someone else finds the topic worthy of debate.  After second, the debate begins.  After the debate has exhausted all relevant points, the board chair closes the debate and calls for the vote.
  • The power of time.  Or rather, the power to control time within the meeting.  The board chair can, and probably should, limit debate to some period of time, say 5 to 15 minutes.  If the board feels that the time allotted isn’t enough, it likely means there is a problem with the motion.  Whatever the cause, the motion should be withdrawn or tabled until it can be either better written or, most likely, better researched.

The reasonable amount of time for a board meeting is somewhat subjective.  A 3 hour board meeting once a quarter is probably very reasonable.  A 3 hour board meeting every month along with two 3 hour board ‘workshops’ the weeks in advance are probably excessive.  Doug and I believe this is a strong driver of director fatigue.  No one wants to have a true part-time job that eats up 12 hours a month – and for zero pay to boot!

Directors, you must know your bylaws, CC&R’s and declaration.  You are meeting, for the most part, to spend money.  To do this effectively, you must know what is allowed and disallowed by your rules.  For instance, if the Association’s CC&R’s state that money spent to maintain a common element that benefits fewer than all the units must be billed to the benefitting unit owner(s), do you understand what this really means and what you should be voting on?

Notice I don’t say you need to be an expert on Robert’s Rules of Order.  You don’t really.  RRONR is really designed for large body deliberations although the rules themselves do apply in general to smaller boards such as your association board of directors.  Here is what you need to know to be successful when it comes to Rules of Order in your Association:

  1. Don’t speak until there is a motion and second
  2. Speak only on matters pertaining to the motion
  3. Close debate and vote
  4. Move to next topic

To make motions successful:

  1. Prepare all motions and resolutions in writing a week in advance
  2. Submit all research and supporting documents along with the motion
  3. Submit these materials to the secretary or your manager
  4. The agenda should address the motion/resolution
  5. When it is your turn, speak clearly on the motion; don’t ad lib

Well run meetings do not have to be boring.  Directors can and should disagree.  But the disagreements need to be kept within the boundaries of the agenda and motion.  Anything more is a disservice to your Association and the owners you agreed to serve.

Stop the bitching and start overseeing.  You will be happier and so will the owners.  You might even save a buck or two.

The Pain of Change

The reason there has been such a vast span since my last article is that we landed two new condo association clients for our financial and accounting management service in the span of 24 hours a few weeks ago.  Sadly, these were not your typical ’60 day termination’ contracts; both were in the midst of major issues with management that required us to step in and take over essentially from day one.

So, where our normal onboarding process allows for a slow, smooth transition, these required us to step in and get things moving: Along with changing the way that the board’s made decisions.  Fortunately for us, the boards were up to the challenge.  Unfortunately for us and the boards, their prior managers are a little less use to the frenetic pace that change often brings.

We understand that change brings pain.  No one likes this process, especially when everything has been designed to make change-over challenging.  These barriers often create very high and unnecessary switching costs that are going to be borne by either the new manager or the association.  None of which, by the way, benefits the association in the slightest.

If you, as a board, are even remotely thinking about changing managers, I strongly suggest you start getting things in order today.  The more you do to plan for this change, the less pain and cost there will be in ultimately changing managers.

About 120 days out:

  • Prepare a Request for Proposal (request a copy )
    • Clearly define what you want in a manager
    • Provide information about your association and the board
    • Specify how you want the banking handled
    • Specify how you want the accounting handled
  • Send it to at least five prospective management companies

About 90 days out

  • Review the proposals and select your top three
  • Interview those top three
    • Ask them how they intend on actually supporting your association
    • Find out about extra costs – these add up and kill your budget
    • Ask how they see the transition working

65 days out

  • If you are changing managers, send the termination letter by mail, email and return receipt requested
    • State your intention to change on the specified date
    • Inform management of your expectations about the change
    • Provide the contact information for the successor and state your expectation that they cooperate in the smooth transition to new management

Believe it or not, this is when the more exciting parts begin.  Once the managers are informed of the decision, you can now begin the process of moving things in a new direction.

If your current manager terminates the relationship with 60 days notice though, you have a little less opportunity to make careful decisions.  The real problem is that most managers use software they have licensed – and which is likely not the same software used by your successor.  So, any changeover is likely going to require extensive manual data entry in even less time than a board-invoked termination.  Because, by the time you run through the new manager selection process you likely have less than 20 days for new management to go from zero to full operations.  And this is going to be expensive.

Because the software and the bank accounts are often completely under the control of your current manager, getting things moved around is almost impossible within the limited time frame imposed.  Not only do you have to deal with trying to find managers, you have to live with the fact that you have almost no control over your funds or your accounting – which is likely going to be screwed up when your new manager forces you to use their accounting system.

Management changeover is currently one of the more stressful steps a board is involved with.  It is no wonder that associations often stick with their management even when unhappy.  It could cost thousands of dollars to switch and take almost a year to get back to any semblance of normalcy.  And in the process, vendors go unpaid, owner deposits get screwed up and required documentation for property sales is not handled timely or effectively.  Better the devil you know…

You need to have a plan.  You should attend your local Community Association Institute (CAI) meetings to meet with managers, just to get names.  You should have an RFP prepared and ready to go.  Not just for management, but any of your major contracts; such as landscaping and elevator maintenance.  Companies change, merge, go bankrupt and you could be left scrambling to fill the void when you find out at the very last minute.  Be prepared and eliminate some of the stress that comes with running your association.

At C.O.R.E. Services, we focus on preventing and detecting fraud so that owners can have confidence in their board. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to rooting out the risks of fraud. Our new financial and accounting management services are designed to help the board and owners rely upon their accounting and financial statements to help with the decisions surrounding their community and home. You can find more information about us on our website.

 

Is Trouble a’brewin?

Two grand a month.

That is how much management is currently charging the condominium association we went to visit the other day.

$2,000 for management to provide financial statements that the board can’t make heads or tails of, vendors to go unpaid, delinquent owners to continue to not pay, projects to go over budget… You get the point.

“What are we paying for?” was the board’s overarching question.

Fascinating question.  Do you know what you are really paying for?

Here is what we believe you are, and should always be paying for, to the exclusion of everything else –

Managing the money.  Your money, your neighbors money.  Your hard earned resources that you have to turn over to your association to take care of the common property.

You have a right to know how money is coming in and how money is being spent.  Your manager has an obligation to report the activity to you.  They work for your association.  And you, my dear directors, are the elected representatives of your association.  It is often a painful, thankless task and your management is not there to make your life even more challenging.

“What do we get when we pay you?” was asked.

“Truthful reporting and strict control over your money.” was our reply.

“What about our newsletter?  Will you prepare that?”

“Do you think a newsletter is more important than your money?”

“No!” was the unanimous response.

“Then we will pass on writing your newsletter.  You can write it and we will focus on managing your money effectively and reporting to you how things are going.”

“Will you evaluate the ARC requests?”

“Do you think an ARC request is more important than your money?”

“No.” was the unanimous response.

“Then we will pass on evaluating ARC requests.  We will help control them to ensure the board and ARC committee respond timely and correctly, but we will leave the evaluating in your capable hands.  It is, after all, your community.”

As silly as it sounds, money is what really matters.  You plan what you are going to spend, you assess it and then…. what?

Do you have costs exceeding budget – only you don’t find out until year end?

Do you have off-budget spending and you never find out until someone asks about it two years later?

Are 20% of your owners not paying and you are paying extra to collect?  Or worse, splitting late fees with management?  Isn’t that an interesting incentive.

Condominium association management is all about the money.  It is all about getting the assessments collected – it is all about ensuring you get the maximum value from your vendor contracts.  Any manager who says that you ‘need’ them to send their handyman around to fix things or to show up to committee meetings isn’t really looking out for your association.

It is your money.  Ask yourself what could be more important than ensuring that you spend no more than what was assessed?  Ask yourself why you are ok with financial reports that you can’t understand – or worse – management can’t explain?  Ask yourself why you pay management to keep your accounting only to turn around and engage an accountant to make a bunch of adjustments at the end of the year to fix management’s poor accounting?

When it comes to managing your condo association, there are very few things that matter more than your money.  So, ask your management, “what do you think your job is?”

And, if they respond with anything other than, “Managing your money.” Trouble is a’brewin’. Consider finding new management that gets it.  And if they respond, “managing your money,” ask them if it is only because they read my blog.

Honestly, if you have to ask, you already know the truth – managing your money and reporting it isn’t their top priority.  And it begs the question, “can they be honest with you?” when they give you an answer which contradicts everything you know and feel.

Money matters.  Make the money your priority and you will be surprised at how well everything else falls into place.

At C.O.R.E. Services, we focus on preventing and detecting fraud so that owners can have confidence in their board. The boards are dedicated but typically outsource the management who often do not understand the vital role of systems dedicated to rooting out the risks of fraud. Our services are designed to help the board and owners rely upon their accounting and financial statements to help with the decisions surrounding their community and home. You can find more information about us on our website.