Financial Do's and Don'ts for Condominium / HOA's
By Sam Tomasetti, C.P.A., Tomasetti, Kulas & Company, P.C.
Financial Do's
1. Plan - Use this time to discuss and decide on financial goals for the coming year and the future.
2. Budget - Translate your plan into numbers and the timing of expenditures throughout the year and then relate that to how much you will raise on operating and reserve fees and how much you may spend out of funds accumulated in prior periods to make sure your plans can be achieved or if they have to be changed to accommodate cash inflows. Do this on a timely basis.
3. Compare - Compare the actual results of your financial year with your budget as you go and at the end of your year to see how you did and to know when you need to change plans to respond to emerging issues and still maintain your financial health.
4. Reserve - Have a major repair and replacement study performed and fund it.
5. Invest - Invest your reserve and excess operating funds according to an agreed upon strategy.
6. Document - Document your decisions in your minutes. For all significant expenditures have two signers.
7. Get bids for Major Repairs/Replacements
8. Get Qualified Help - Get qualified help when you are facing something you don't have the knowledge to handle and don't assume your work is done. Educate yourself and follow-up.
9. File Tax Returns Timely - Form 1120H is an election alternative and can only be used if filed timely.
Financial Don'ts
1. Don't ignore fees owed to your association (accounts receivable from unit owners). Your neighbors must pay their fees to insure the association has the money to pay its bills.
2. Don't ignore the bills you owe. If your bills are not being paid on time, you may have cash flow problems and the earlier you know this the more time you have to fix it before the problems become severe.
3. Don't assume that having someone else or your property manager do things absolves you of responsibility.
4. Don't ignore internal control. You need this to protect the association assets from theft.
5. Don't avoid reading your financial statements. It may not be the most easily understood document, but it will make a large difference in the financial success of your association as you will be able to head off many problems.
6. Don't forget that participating at board meetings in a positive way - before, during and after - will really help your understanding of the financial condition of the association.
Sam J. Tomasetti, CPA: is the president and managing partner of Tomasetti, Kulas & Company, P.C. and has been a practicing CPA for over 35 years serving a diverse base of clients including many homeowner association. The above Condominium / HOA Financial Do's and Don'ts article is an excerpt from the training session Sam regularly provides to HOA boards as part of the CAI-CT ABC's basic community association course.
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