Condo Media - July 2022 - 16

Asked & Answered
Good Financial
Management
Management
Best Practices for Association Boards
Our board is looking to formalize
how association funds are managed and
ensure appropriate oversight and spending.
Can you provide some best practices
to protect association funds?
There are few things more important than transparency
when managing other people's money, which is
exactly what a condominium board is charged with
doing. The best managed community associations
prepare accurate, understandable, monthly fi nancial
reports for the board and unit owners. It is important
to provide reports that include a budget to actual report,
a balance sheet, reconciled bank statements, and
a report showing expenses incurred but not yet paid.
Financial reports serve two fi nancial management
purposes: to understand how the association has
performed fi nancially and to make decisions based
on the results, which will impact future activity.
ency when managing other people's money, which is
exactly what a condominium board is charged with
prepare accurate, understandable, monthly fi nancial
reports for the board and unit owners. It is important
EFFECTIVE BUDGET PLANNING
An annual budget should be prepared by forecasting
the upcoming year's expenses (including an adjustment
for infl ation) and reserve contribution based
on the recommendations included in a reserve study
prepared by an independent engineer or architect.
Using the prior period's results is the beginning point
in projecting income and expenses, but it doesn't stop
there. It's important to also incorporate the fi nancial
impact of policy changes such as changing levels of
services. For example, adding or subtracting security
shifts, installing utility sub-metering systems, or signifi
cantly increasing deductibles on master insurance
16 CONDOMEDIA July 2022
policies have fi nancial implications that
need to be refl ected in the annual budget.
Many associations pride themselves on not
raising fees but this practice is not refl ective
of reality as infl ation always exists, especially
today's infl ation increase being at historical levels,
and annual member dues need to refl ect this reality.
need to be refl ected in the annual budget.
Many associations pride themselves on not
raising fees but this practice is not refl ective
of reality as infl ation always exists, especially
today's infl ation increase being at historical levels,
ADEQUATE RESERVE FUNDING
Among the most common concerns boards have
relate to the adequacy of reserve funds. The answer
is surprisingly easy to determine, and the answer
lies with having a reserve study prepared by an
independent professional engineer or architect.
A reserve study provides a road map to saving for
the future with the goal of funding future major
repairs and replacements. The reserve study should
be updated by an independent professional engineer
or architect every three to four years because many
of the input variables can change in a short amount
of time.
The reserve study lists all the major components
of the common property, estimated remaining useful
lives of each of the components, and estimated costs
to replace the components. The reserve study will
project annual funding needs in order to keep up
with maintaining the components of the property.
Condo Media - July 2022

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