UNDERSTANDING A COMMUNITY ASSOCIATION'S FINANCIAL STATEMENT
The Association's Financial Statement reflects the financial condition of the Association for a certain period of time (Monthly, Quarterly, Semi-Annually or Annually).
The first step at the end of each month is a reconciliation of the Bank Accounts to ensure that each transaction is properly accounted for. C. Allen Properties then prepares monthly financial reports for the Board of Directors. The report is comprised of the following:
Accounts Receivable and Prepaid Fees Report
This is a summary of any unit owner who is delinquent in paying their fees or has prepaid fees in advance. If delinquent, an explanation is given stating the steps that have so far been taken to collect the fees i.e., sending the pre-lien letter or turning the matter over to legal counsel.
Balance Sheet
The Balance Sheet provides a summary of the financial condition of the Association as of the end of each month. Assets are shown such as "Current Assets" including all bank account cash balances and "Other Assets" such as Maintenance Fees receivables, prepaid insurance and prepaid expenses.
Current Liabilities are shown, such as prepaid Maintenance Fees, accounts payable and any debts. Long term liabilities include the monies in the Reserve Fund set aside for capital expenditures planned in the future. The Reserve Fund account balance for each expense category is reflected.
Income Statement
The Income Statement we provide shows Actual Expenses versus the Budgeted Expenses and shows the variance between the two. The Boards of Directors receive a Current Month-To-Date report of income and expenses and well as a Current Year-To-Date report. The income includes accrued Maintenance Fee Assessments, Bank Account Interest, and any other income received. The Expenses are broken down by budget categories. It's a comprehensive report that gives the Directors a valuable tool to track expenses versus the budget.
Check Ledger
Each month a Check Ledger is sent to the Board showing each expenditure; Date, Check Number, Vendor, Explanation of Expense and Amount.
At C. Allen Properties we recognize the importance of keeping the Board of Directors completely up-to-date on all financial matters. We encourage communication, questions and involvement and we strive to provide reports that are comprehensive yet easy to read and understand.
If you have any questions about your community association's financial status please don't hesitate to contact us!
Lonna Allen, Accountant
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Article by Rob Samouce, a principal attorney in the Naples law firm of Samouce, Murrell & Gal, P.A. He concentrates his practice in the areas of community associations. Published in the Naples Daily News.
Many condominium and homeowner assocation owners take it for granted that their grass gets cut, their building gets cleaned and painted, association bills get paid, assessments collected, association meetings are properly held and the association business gets done.
Many of the owners don't understand what it really takes to make this all happen. What it usually takes are great neighbors, who take it upon themselves to unselfishly run for and then actively participate on the association's board of directors and serve as officers. To do this properly takes a whole lot of time from these volunteers and they don't get paid. Yes, they don't get paid - zip, nada, nothing.
In order to make their community run smoothly, the directors and officers (president, vice president, secretary and treasurer) have to schedule meetings on a regular basis to conduct the business in the sunshine at properly noticed meetings.
For the place to be well-maintained, the board and president have to usually contract for ongoing professional management of the property; bookeeping and accounting services; legal needs; and professional landscaping.
At various times other professionals such as engineers, architectes, contractors and subcontractors have to be hired to repair and replace association property.
Although some of these tasks can be delegated to management or committees, it is the directors and officers who are ultimately responsible for getting things done right and will be the ones to blame if something goes wrong. And guess what? Most of these volunteer directors and officers are usually not experts in these matters but must rely on what the expert professionals are telling them.
One of the positive things these volunteer directors and officers can find comfort with is the knowledge that if they act in a reasonable manner in carrying out their duties, they will be protected by state statutes which indemnify the officers and directors for legal claims brought against them if something goes wrong.
In addition, most condominium and homeowner associaitons carry directors and officers liability insurance to covere negligence claims against the directors. Only if an officer or director acted recklessly or wantonly and willfully against the advice of the association's experts would that officer or director not be proteced by Florida law or the associaiton's insurance policies while carrying out their association's duties.
I am always taken aback when I attend an association's annual meeting and listen to some few owners complain to the board about the most trivial of things without at the same time providing any constructive comments. Many times, such complainers are bringing up their complaints for the first time although they have had all year to tell the manager, president or another director about what is on their mind. These people usually will not help if asked to volunteer to cure the problem they perceive but rather seem to enjoy carrying out their self-nominated continuing position as community antagonizer.
Constructive criticism is usually well received by a board and such should be presented when appropriate. However, what really should be done more often is a round of thank yous to all the directors, officers and other volunteers in a community for a job well done most of the time.
Boards always hear what is wrong but seldom hear when things are going right. "Things going right" just does not happen by default. It takes lots of time and effort by these unpaid folks for things to go right. So let them know how well you think of them whenever you can. Praise for a job well done can sometimes make up for the lack of pay and long hours. By throwing an acknowlegement of thanks their way now and then, you just might be able to obtain and retain good directors and officers for the sake of the well-run future of your community.
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IT'S BUSINESS....
The current economic downturn has affected many associations in a personal way. Unfortunately we are seeing some of our neighbors and friends going through financial difficulties and unable to pay maintenance fees and/or their mortgage payments on time.
It is difficult to separate personal feelings and sympathy for Community Members, but it has to be remembered that a Condominium Association is a BUSINESS that must treat delinquent accounts like any other efficient, professional entity would.
Florida Statutes and Condominium Documents have specific collection procedures. With the currnet foreclosure crisis it is more important than ever for condominium associations to stay on top of delinquencies. The Florida Statutes require us to send "Intent to Lien Notices" 45 days in advance of legal action, even though this is very difficult to do with friends and neighbors. The notice must be mailed via certified and regular mail.
The vast majority of our homeowners have an excellent payment history. You may have been traveling and missed the maintenance fee bill. Please don't misinterpret a letter from your Association reminding you to pay. You may think it's a harsh communication but please remember it's not personal: It's BUSINESS and it's the Associations most critical obligation.
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