Attention Boards: Please Review Your Financials!

This is more of a public service announcement. Please review your financials monthly!

Most errors can be researched and corrected quicker and easier in the period that it occurs. We have been finding very often that bookkeepers post unreconciled items to the Retained Earnings or an Exchange account. This is only a good practice if it gets reconciled prior to closing the monthly books. Once the books are closed and time passes, it is increasingly harder to research.

There is also the mantra that “the CPA will clean it up at the end of the year.” Well, not unless we are auditing it (and it is within the scope of the audit). If your revenues only require you to have a Compilation per FL Statutes, that is not likely something a CPA will investigate.

It is very important for your monthly financial package to have supporting schedules for all balance sheet items, bank reconciliations, and bank statements. This is also why it is important to have a licensed property management company that has the tools in place to provide this detailed information. See “Get Managed and Stop Losing Track.” Having this information in your monthly financials will keep everyone accountable and allow the Board to verify all the information ties to supporting schedules on a regular basis.

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.

Get Managed and Stop Losing Track

There are over 50,000 associations in the State of Florida. Millions of people live in associations. There are 30-40% of US associations that are considered self-managed.[1]

Being self-managed carries a high-risk factor. You have unit owners controlling all aspects of the association with little or no internal controls. They have access to the accounting systems, keep track (or do not keep track of) receivables, etc. When assessing audit risk, we have a much higher measure on self-managed associations than managed associations. Which also means that you will pay a higher fee.

When you hire a management company, you are paying for these internal controls. Sure, it can be expensive (Everything is expensive these days). You want to make sure you aren’t saving money on management fees to lose it on uncollectible assessments, poor oversight of projects, higher costs due to lack of bargaining, etc. Using a management company gives you access to entire departments for processing transactions, such as Accounts Receivable, Accounts Payable, Accounting, and Property Management. Segregation of these duties is a huge risk mitigator.

It will also save you time. When you find the right fit with a management company and property manager, you will soon find the time to spend with your family (or golfing!).

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.

[1] 2020StatsReview_Web.pdf (caionline.org)

Special Assessments: Best Practices

There are several ways to navigate Special Assessments. You need to consider the type of project, costs of project, collection difficulties, cash flow requirements, cost overruns, and more. Then there are the accounting implications on top of it all.

From an accounting perspective, it is always best to segregate Special Assessments from typical Operating funds. Since the Special Assessment is for a specific purpose, you should take steps to ensure that it is accounted for transparently. Special Assessment revenues are deferred until the related expenditure’s performance obligations are met. When setting up Special Assessments in your accounting system, you should make sure that it has its own unique charge code that distinguishes itself from regular maintenance assessments. Balance sheets and income statements may need to be reformatted to present the information clearly.

Always take into consideration how you structure payment plans. You need to follow the cash flow requirements of the project while also thinking about the economic needs of the unit owners and their ability to make the payments. Sometimes a loan is necessary to bridge that gap.

It is always recommended that you speak with your CPA and attorney when planning a special assessment. Sometimes there are governing document rules that must be followed. Sometimes the bookkeeping of the assessment needs to be handled differently.

We have been working with our associations for decades to make the best decisions when implementing a special assessment. Contact us if you have any questions about implementing a Special Assessment.

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.