Current Digital Issue
|
|
Click to read.
|
Past Digital Issues
|
|
Click to read.
|
Save Your Association Some Money
Published August 2024
Boards of directors have a fiduciary duty to the community associations they serve. The following tips are provided as a beginning place for directors to begin to carry out these duties responsibly.
Financial Strategies for Board Members
By Ana Rivero
Managing an association›s money is an important facet of being a board member. Here are some pro tips for making it more manageable!
Keep Track of Everything—While your property management company will be collecting funds, monitoring is still essential. Accounting software can streamline your process, reduce errors, and help ensure precise recording keeping, necessary for compliance.
Conduct Regular Financial Audits—Reviews are essential to identify discrepancies and prevent fraud. The board should maintain meticulous records of all financial transactions.
Photo by iStockphoto.com/felixmizioznikov
Stick to Your Annual Budget—Creating multiple budgets based on different scenarios can help prepare for various market conditions and keep your association on track.
Rely on the Experts—Whether it’s your property management company, a professional accountant, or legal counsel, they are experts for a reason.
By adhering to these practices, boards can optimize their financial operations and make informed decisions for long-term success.
For more information on Allied Property Group, call 305-232-1579 or 239-241-6499 or visit www.alliedpropertygroup.net.
How It’s Done in Florida
By Connie Lorenz
While working with a community for six months, getting them prepared to move forward with a rejuvenation program utilizing Pavement Dressing Conditioner (PDC), I hosted a “What to Expect” meeting and discovered that an area we had quoted to be repaired had been repaved by another company. I was upset about the poor quality of the project and was going to help the board get the proper paving by reaching out to the contractor and educating the contractor about how we do things in Florida.
Why educate a Florida contractor? Because it wasn’t. How did I know that? Because the board paid the contractor within 24 hours of the work being completed—the original work was ripped out and redone and the area was still falling apart! The board member didn’t want to be honest with me, however, when I jokingly stated, “What did you do, hire the guy you met in the parking lot at the local do-it-yourself store?”
No true Floridian contractor will buy their supplies from the local retail stores as it’s not cost effective for us. We buy from suppliers that approve us for distribution and application of their products. Because of Florida being so transient, a lot of our suppliers will not sell to the contractors that come down during the winter months.
Support your local businesses! The sweet taste of a low price is far outweighed by the bitter taste of a poor-quality project!”
Connie Lorenz is president of Asphalt Restoration Technology Systems. For more information, call 800-254-4732, email connie.lorenz@asphaltnews.com, or visit www.asphaltnews.com.
The Helping Hand of a Good Community Management System
By John More
Good community management systems help in all facets of an association’s business.
People often buy into associations for the amenities, like tennis courts, spa, gym, and pool, which are ready to use without owner maintenance. However, these come at a cost to the association.
Owners agree to pay for maintaining common areas and amenities when joining an association. Failure to pay means losing access to these areas. It’s frustrating to pay fees on time while others, who don’t pay, use the amenities. Restrictions must be applied based on association rules, but blocking all doors is illegal and difficult with commercial access systems.
The right management system allows easy barring of non-paying units from certain areas. Once fees are updated, access should be easily restored. A proper management system with a built-in access system helps collect owed money effectively.
John More is the owner and president of Asterix Software and Asterix Hardware. For more information, visit www.asterixsoftware.com.
Minimize Damage—Detect Water Leaks
By Beatriz Eguaras
Water damage is the leading cause of insurance claims in residential buildings. The costs and deductibles for water damage coverage are skyrocketing. Buildings with a history of significant water claims may find it difficult to obtain insurance and may need to consider self-insuring. Fortunately, there is a better way to manage water leak risks. We believe that Aware Building’s “Whole-Building Leak-Detection” wireless solution is the answer. Detecting water leaks early is crucial for minimizing damage.
Where does your building incur its water damage? Our wireless leak sensors can be placed anywhere—in bathrooms, underneath sinks, near dishwashers and washing machines, in PTAC units or water heater closets, and in mechanical rooms. Our sensors can monitor and alert you to the presence of water as well as changes in humidity, temperature, and more!
We are here to help you take proactive measures rather than reacting to unexpected situations. Aware Buildings is excited to work with you to keep your risk profile in good shape!
Beatriz Eguaras is a senior account manager for Aware Buildings. For more information contact Aware Buildings at info@awarebuildings.com.
Revenue and Savings for Your Community
By Keith Minarik
One of the many advantages of a bulk telecommunications agreement is the potential for a telecom service provider to offer a door fee to the homeowner association (HOA) or condominium association (COA) upon contract execution. This one-time per-door payment provides a valuable opportunity for communities to bolster their reserves or fund neighborhood projects.
For HOAs and COAs, these door fees can significantly improve financial flexibility. The additional funds can be allocated to various initiatives, such as upgrading amenities, enhancing security systems, or offsetting the costs of large assessments. Furthermore, these agreements ensure residents receive fast, high-quality, and reliable internet services, fostering a more connected and appealing community environment along with significant savings compared to retail pricing.
Ultimately, incorporating door fees into bulk telecom agreements not only supports financial stability but also promotes continuous community improvement, benefiting both communities and their residents.
Keith Minarik is vice president of community development with Blue Stream Fiber. To find out more about how Blue Stream Fiber can help support your communities’ projects, visit https://www.bluestreamfiber.com/partner.
The Importance of a Preventive Maintenance Plan
By Ashley Dietz Gray
Maintaining condominium or HOA common elements is vital for the seamless operation of any community. Creating a comprehensive preventive maintenance plan is not just about ensuring the smooth functioning of common elements; it is also about prioritizing the safety and comfort of all community members. By proactively addressing maintenance needs, communities can prevent potential safety hazards, minimize disruptions to daily operations, and save on costly repairs. Regular maintenance also contributes to the preservation of property values, ensuring that investments in the community remain sound and stable.
Neglecting maintenance can result in issues like elevator malfunctions, air conditioning problems, and unexpected equipment breakdowns. To prevent such problems, it’s crucial to establish a proactive maintenance schedule that identifies all common elements in need of upkeep.
For condominiums, outside professionals should handle roofs, elevators, cooling towers, generators, and alarm systems while in-house staff can take care of tasks like air filter replacement, touch-up painting, and cleaning. HOAs should entrust professionals with maintaining trees, electrical systems, lakes, and pools while in-house staff can handle pressure washing, minor repairs, and basic maintenance duties.
Prioritizing preventive maintenance is a fundamental aspect of responsible community management that benefits everyone involved.
Ashley Dietz Gray is vice president of marketing for Campbell Property Management. For more information, call 561-704-4042, email adietz@campbellproperty.com, or visit www.campbellpropertymanagement.com.
Basic Financial Statements
By Julie A. Jaram, MBA
Reading and interpreting financial statements for your community association is an integral part of the community’s success. Often, it may seem as though accountants speak a different language. Below is an overview of the basic financial statements with a brief description to clarify the purpose of each report.
Income Statement
The purpose of the income statement is to keep track of income and expenses over a specific period of time (for the six months ended June 30, 2024). This statement should contain a couple of key columns—actual amounts and budgeted amounts for income and expense categories. This allows the reader to assess where they stand for a specific period of time, and whether they are within or outside of budgeted amounts for each category. Net income/loss is listed at the bottom of the income statement and overall states if the association has a surplus or deficit for the period stated.
Balance Sheet
The balance sheet depicts a snapshot of the association’s financial status at a given point in time and is made up of three sections: assets, liabilities, and members’ equity/fund balances.
Assets are items that the association actually owns. Assets consist of items such as cash, accounts receivable (assessments due from owners not yet paid), prepaid expenses, and deposits (money held by the association that will eventually be returned).
Liabilities are amounts owed by the association (most likely payments due to vendors for products or services).
Members’ equity/fund balances state the current balance in the operating and reserve funds and the current period’s net income or loss.
These basic reports are typically prepared on a monthly basis and sent to board members for review. A few key things to consider when reviewing include the following:
- Compare cash balance on balance sheet to bank statements to ensure balance ties out
- Review accounts receivable—specifically, if the amount is continually increasing
- Compare budgeted expenses to actual figures
- Confirm reserve expenses are paid from a reserve fund
Julie Jaram, MBA, is a partner for Devin & Associates. For more information, call 727-290-2578, email jjaram@devinandco.com, or visit www.devinandco.com.
Budgeting Time
By Ed Williams, RRC
So, it is budgeting time. This is just a reminder not to forget about your roof(s). Most manufacturers require that the roof be inspected at least once a year by a competent professional in order to maintain the warranty. In addition to this once-a-year timetable from the manufacturer, we recommend that inspections be done before and after any significant damaging weather, like a hurricane, occurs. Small repairs may mean the difference between a complete loss of the roof or little to no damage.
In addition, insurance companies are requiring replacement of roofs when they are 20 years old. If your current budget assumes the roof will last longer than 20 years, then adjustments will need to be made. This applies mostly to flat roofs. If you have tile, metal, or shingles, you should check with your agent to find out what their companies require.
Ed Williams is the owner of Ed Williams Registered Roof Consultant. For more information, call 772-335-5832 or email EdWilliamsRegisteredRoofConsultant.com.
Budget Preparation Checklist—Keep It Simple
By Lauren Chieffo, LCAM
As associations gear up for budget season, it’s crucial to navigate the process with strategic planning to ensure financial stability and address the unique needs of your community. To keep the budgeting process straightforward, focus on clear, consistent communication, prioritize essential expenses, and use historical data to guide your projections and decisions. Here is a checklist of our best practices for preparing your budget.
- Set a Budget Meeting Date—Remember to post/provide notice properly and consider if a workshop is desired.
- Reserve Study—Does the association have an updated reserve study? Are SIRS required?
- Vendors & Contracts—Check contracts and reach out to vendors to review potential contractual updates.
- Projects—Go over projects the association would like to complete in the next year and request bids for proposed work.
- Review Trends & Data—Use the previous year’s budget, current financials, and yearly trends to estimate costs.
- Plug in Your Assumptions—Plug the estimated numbers into a budget spreadsheet and calculate Association dues.
Lauren Chieffo, LCAM, is a Regional Director with GRS Community Management. For more information, call 561-641-8554, email residentservices@grsmgt.com, or visit www.grsmgt.com.
Financial Best Practices for Community Associations
By Marcy Kravit, CMCA, AMS, PCAM, CFCAM, CSM
Effective financial management is essential for community associations. Key practices include transparent budgeting, regular financial reviews, and proactive risk management. Specialized accounting software can streamline tracking and ensure accurate reporting. Regular financial audits build trust among residents. Implement fraud prevention measures and train board members in financial management to safeguard community assets. Establishing reserve funds and appropriate insurance policies protects against unexpected challenges.
Additionally, incorporating bulk television and internet services from providers like Hotwire Communications is cost effective. By negotiating bulk service agreements, associations can secure lower rates than individual residents would pay. This not only saves residents money but also enhances the overall value of living in the community by providing high-quality, reliable service at a fraction of the retail cost.
Marcy Kravit, CMCA, AMS, PCAM, CFCAM, CSM, is director of community association relations. For more information visit www.hotwirecommunications.com.
Playbook for Community Finance Success
By Suzel Broe, CFO
In a time when Florida community managers and association boards are navigating significant changes in the insurance landscape and upcoming state law compliance deadlines, do not lose sight of fundamental budgeting and finance best practices. Sound financial health ensures a community’s stability amid any broader shifts.
There are certain “musts” for every association during budget season, including the following:
- Conduct a transparent budgeting process with regular reforecasting
- Prevent financial mismanagement through the segregation of duties, strong internal controls, and employee training
- Diversify association investments.
- Implement economic safeguards such as reserve funds and robust insurance coverage, engaging legal professionals to ensure compliance and a professional management team
These strategies bolster an association’s financial well-being and lay a secure foundation for long-term success. Stay proactive and informed, and empower your community for a brighter financial future.
For more information on KW PROPERTY MANAGEMENT & CONSULTING, contact Suzel Broe chief financial officer—financial services at 305-476-9188 or sbroe@kwpmc.com, or visit www.kwpmc.com.
Benefit from Cost Savings and Efficiency
By Stephen J. Kirschner, CPA
My HOA in Boynton Beach can serve as an example of how your association can benefit from cost savings and efficiency.
We utilize multi-year contracts that are mutually cancellable on 60-day notice without cause. For cable and internet service, we use a consultant at a reasonable fee. We have the same vendor over several contracts, including wiring the homes for fiber optic.
Management is for a fixed fee, with salaries included and reasonable annual compensation increases. Our property manager does the books on site reviewed monthly by a management company controller.
Billing is monthly, so delinquencies show up faster. And we accelerated the due date from 30 to 15 days. In addition to the 18 percent APR (annual percentage rate), we added a $25 administrative fee for every month payment is late.
We screen both buyers and renters, and renters require a $1,000 security deposit against any damages. However, the owner is still responsible for the maintenance.
Create a realistic budget and watch for variations, which is where you see if you have a problem.
Steve Kirschner is a Florida Supreme Court certified mediator for Lasula Consulting & Mediation. For more information, call 561-840-9798, email stevekirschner@mediatorcpa.com, or visit mediatorcpa.com.
Main Ingredient for a Healthy Community
By Ryan Clifton
The main ingredient for a healthy community is proper budgeting. A proper budget will cover all required operating expenses to maintain the community while fully funding reserves.
A best practice for budgeting is to adequately fund the irrigation system budget line to optimize its performance. Your expensive landscaping thrives, survives, or dies mostly based on the performance of the irrigation system. Consider a preventive maintenance program or independent inspector for your system.
Also, create a project list. Prioritize the order of your list first by association needs and then association wants. Each budget year, add the appropriate number of projects from this list. This list will provide better management of the projects and proper communication of project completion to membership.
The best way to manage reserves is to obtain and update your reserve study. It is essential to follow the reserve study’s funding and project schedules and to obtain an updated study every three years. The simple remedy to avoiding special assessments is to follow the reserve study plan!
A proper budget will enhance the beautification of the community for families to enjoy while avoiding financial hardship for the members.
Ryan Clifton is vice president of developer operations, CMCA, with Leland Management. For more information call 888-465-0346 or visit www.lelandmanagement.com.
How to Build and Maintain a Financially Healthy Community Association
By Camille Moore
Maintaining a financially healthy community association ensures that your community remains attractive, well-maintained, and valuable. A financially sound association can adequately fund maintenance, improvements, and unexpected expenses, benefiting all residents. Here’s how to build and maintain a financially healthy community association.
Establish a Clear Budget—Assess community needs, prioritize essential expenses, and include a reserve fund for unexpected repairs.
Accurate Financial Records—Maintain transparent accounting and conduct regular audits to ensure accountability.
Fair and Consistent Fees—Review and adjust assessments annually and enforce timely payments to prevent delinquencies.
Cost-Effective Vendors—Obtain competitive bids for services and invest in preventive maintenance to avoid costly repairs.
Engage and Educate Homeowners—Communicate regularly about the association’s financial status and offer financial education related to the association. Consider having your auditor present annually at the annual meeting.
Professional Management—Hire experienced managers, provide ongoing training for board members, and seek out industry best practices.
Camille Moore is a creative content writer for RealManage. For more information email camille.moore@realmanage.com or visit www.realmanage.com.
Mitigating Financial Risk: Reserve Studies, Lending, and Insurance
By Matt Kuisle
Traditionally used as an internal planning tool, reserve studies are increasingly capturing the external attention of lenders and insurers. Neglecting to conduct or follow a reserve study can have significant financial repercussions as associations that fail to adequately budget for necessary repairs and maintenance often face costly surprises down the line.
Lenders have begun scrutinizing structural integrity and requiring greater transparency from associations. Recently Fannie Mae and Freddie Mac released a list of blacklisted properties that are ineligible for lending due in part to structural issues, deferred maintenance, and failure to conduct reserve studies and fund reserves properly.
Insurance companies are also utilizing reserve studies when assessing risk and gauging the association’s ability to cover potential claims without resorting to special assessments or loans.
The growing focus on reserve studies reflects a broader shift toward risk management and financial diligence. Boards and managers must adapt by prioritizing proactive maintenance and budgeting practices through conducting regular reserve studies.
Matt Kuisle, PE, PRA, RS is regional executive director with Reserve Advisors. For more information, call 813-536-7201, email matt@reserveadvisors.com, or visit reserveadvisors.com.
Budget for Chute Replacement
By Joanna Ribner
Trash chute maintenance and replacement is a relatively new area of concern, but chutes do have a life expectancy. Most budgets do not have chute replacement in their reserves, but they should. The cost of replacing a chute, or part of a chute, averages $8,500 per floor when you add in permits and fire sprinklers! In taller buildings this adds up quickly!
Florida’s humid, salty air escalates metal erosion, reducing the life of your chute. Annual maintenance certainly helps to extend it, but rust and age will win out. Annual inspections can monitor rust areas and tears, so we can put an association on notice that the chute has one or two years left. The last thing you want is a chute collapsing and having to be closed down for months while permits are obtained and a replacement is fabricated—on top of not having a plan for the expense!
Joanna Ribner is president of Southern Chute. For more information call 954-475-9191 or visit www.SouthernChute.com or www.TrashChuteParts.com.
Get Your Insurance Claim Off to a Good Start
By Rick P. Tutwiler, CPIA, PCLS
After a major property loss, your association should take charge of the insurance claim process to fulfill its fiduciary duty. Don’t let insurers or vendors control the process as this can lead to disputes and delays.
Instead take the following steps:
- Assign a point person or subcommittee to manage all aspects of the claim. This ensures organized communication and prudent decision making.
- Don’t be in a hurry to fix everything, but do mitigate any further damage. Get multiple quotes, communicate with your insurer(s), and ask lots of questions. Document everything and leave nothing to misinterpretation.
- Associations seeking expert claim handling have the option of hiring a public adjuster experienced in association losses. Licensed adjusters have expertise in policy interpretation, claim presentation, and negotiation. This takes the burden off your board to self-educate and ensures the claim submission aligns with the policy contract.
Photo by iStockphoto.com/nathaphat
By taking these steps, your association can protect its interests, ensure a smoother claims process, avoid costly mistakes, and return to normal operations faster. Remember, your association’s financial well-being depends on a successful claim resolution.
Rick Tutwiler, CPIA, PCLS, is president and CEO of Tutwiler & Associates Public Adjusters. For more information, call 800-321-4488 or visit publicadjuster.com.
Go Mobile
