Condo Association Management Blog

I would send a letter to them stating that I could not help but be suspicous of their work and to please use another method that could be understood. They are calling attention to themselves. 
 
Make them aware that when it comes times to audit that you may be wanting to use an auditor that actually looks for fraud while they are checking the numbers. 
 
Nothing speaks to a board like a letter from an attorney. Get your attorney to send the letter. 

We now have a wonderful property management company that accounts for every penny and reports to the board on a monthly basis. Our previous company often refused to give us appropriate information and refused to turn over the files when we changed management companies. We are currently pursuing this as we have found some discrepencies. Check out the management company completely!

Our manager does not use real bank accounts, but paper versions that are essentially meaningless. He ignores budgeted items and bills according to services he provides whether or not they are requested. 
 
As you can guess, this is a condo hotel. Integrity is highly valued in Duluth, MN. Evidently, the manager was born out of state.

While your Board are not accountants, there are some simple things you can request examine which for us at least are normal operating procedures. 
 
As a property management company, I always recommend against property manager signing on checks. Even when requested by a Board, we do not sign on any checks. We enter bills and prepare checks for board approval and signature. We process the checks in batches per week, and include the invoice behind the check to be signed for examination. Once signed, we send them out. 
 
Every month we reconcile the digital copy of the checkbook to the bank statements to the penny. We send the board a copy of the detailed and summary reconcilliations. Ask for these.  
 
Examine the bank statments, and look at the copies of any suspicious check to make sure it is being deposited by the person / firm the check is made out to. 
 
As for a print off of the checkbooks as well. 

The bigger issue here is that property managers are not accountants by either training or inclination. Most utilize prepackaged software programs specifically designed for property managers, but the managers themselves lack the training and knowledge to modify the "canned' financial information that these packages produce each month.  
 
 
 
I have served as the treaurer of several HOAs. I am a CPA and have been the CFO for several companies. I take the "stuff" I receive from my management company each month and transpose it to an Excel spreadsheet I have designed that compares actual results on a cash basis with our budget for both the month and the year-to-date. I provide this to the other board members each month, and all of the owners each quarter.  
 
 
 
With regard to engaging an auditor, it is important to know that an audit is NOT designed to catch fraud or operational inefficiencies. As such, having an audit (unless a legal requirement in your state) conducted may be a waste of money.  
 
 
 
I would be pleased to review whatever financial information you have. Click on my name at the bottom of this post to obtain my email address, then we can communicate off-line.

You assume the property manager doesn't have the knowledge or training to modify the reports and that may not even be the issue.  
 
In Florida, the books are required to be maintained using accrual method (not cash), and all financial reports are required to be prepared using the accrual method as well. So while you believe the manager doesn't have the knowledge, their hands may simply be tied. There are several accounting systems that we as managers use that won't even allow you to switch between cash and accrual methods. 
 
Yes cash method allows for a better picture of your financial situation, but in Florida at least the law does not provide for using that method.

Thanks for the input so far. I think the problem is two-part. First, charges are not identified. And being a small association of low-income families, money is very tight. It doesn't matter to us whether the manager just wrote a check to the lawyer for $10, or one for $200, we want to know what the service was. And in EVERY SINGLE case, we have to ask. Then, approximately 10 e-mails later, we get a clear answer. And about 50% of the time, we wish they hadn't spent that money. Bottom line, if it isn't power, water, landscaping costs, trash hauling or their monthly management fees, if we want to know what the check was written for, WE HAVE TO ASK. Is this normal??

Sarah: A suggestion based on your last comment. Have your Management Company do the work required up to and including preparing the check. Then INSIST that all checks be signed by two members of the Board, say the President and Treasurer. Do not give authority to the Management company to sign the checks, this is just like handing them a blank check to use as they wish. This way you will be more directly involve in running your business and aware of to whom and for what reason the check is being cut and sent. If your present Management company refuses to work with you like this or refuses to give an explanation of the payments, fire them according to your contractual terms and get a new management company. 

Sounds like you describe that the manager is paying and incurring bills without the board approval. In the Associations we manage, the Board normally decides if / when legal advice is needed and charges incurred. As I stated, when it comes time to cut the check, whatever board member signing the check makes sure it is an appropriate charge and signs the check. If the bill is for a single item, we normally try and note that in the memo field, but typically that memo field doesn't automatically print on reports (including reconcilliations). 
 
If you and the Board are having issues because you want to know about charges as they are incurred, i suggest you change your process for approving payments and incurring charges. I.E., change the authorized signatures on each account to two board members (not a manager), and indicate to the manager that in the future before legal fees are incurred the situation should be brought to the board for a board's decision.  
 
Your manager works for the Board...not dictates to it.

Our Association just went thru the same thing. We had the same Property Management company for years and the previous board asked no questions, and now that the current board became so active we finally fired them. Your board needs to request the following copies every month: your unit delinquency report, a cash flow statement showing what bills were paid, statements showing the exact amounts you have in operating and reserve accounts, a ledger showing what checks were written, and copies of invoices for all bill they pay. You should require they send you copies of all utility bills so you can make sure things get paid on time. And lastly, request copies of your bank statements. Bottom line: inspect what you expect, and make sure you understand the terms of the contract you have with them, and have a back up plan if you have to leave them.

Cash flow statements are different in each software. For instance, QB merely does a summary and does not include on the surface, detail of what was paid. I recommend you ask to see copies of the monthly reconcilliations because this shows detail being recommended (save delinquencies) and allows you to quickly pick out any items of question. If you ask for the monthly reconilliations for each account, you will see a beginning balance, what payments/check cleared, which ones are outstanding, which bills are new and have not been paid yet, ending balance and if the beginning and ending balance does not match to the penny of your bank statements, you have a problem. Additionally, cash flow report is not typically truly representative of what is actually in each account. The Boards we represent all have logins to their online banking and can access the bank accounts to review balances and all other information at any time in real time -- without using management's time to request that we pull it up, copy and distribute it. When we send out the reconcilliations via email, the board pulls up their online access, compares it to the bank statements. 
 
We also send out the 30 - 120 day A/R reports, showing exactly what is owed for each time period and by whom. Quarterly we provide the typical ytd budget performance reports, or as frequently as the Board requests it. 
 
After you have asked for and reviewed all of that, if there are any discrepancies, request a copy of the ledger for each account, and look at the copies of any checks written. 
 
Again, it is ill advised to have your manager to have complete control and be a signer on your bank accounts. If you do so, you are asking for trouble and are opening up the board to accusations of fraud.

I wish half of you that commented could come and be our property manager or member of our board. Our board relies on our property manager for everything, including interpretation of our by-laws. No one ever see receipts and from what I can gather at the meetings after asking that question, she doesn't allow it. Our property manager is also an owner of a few properties here. Her son's work as the maintenance men, our board president/treasurer lives with the pool manager and another board member works at the pool and in the office part-time. Every year for the past 4 years we have been hit with an emergency assessment. They don't cut back on any expenditures, over 100 units out of 700 are in foreclosure. I know you're probably thinking I should run for the board. I have for the past 4 years and gee, I never get enough votes. Of course, until this year our entire voting process was not being done according to our by-laws. Cross your fingers, I'm running again this year. I would love to get on the board to see what exactly is going on and why we never have enough money to pay our bills.

My condo association (Washington) is impossible to track down. After multiple attempts, the Property Manager is refusing to give any information about our financial records to us. I am completely inexperienced in what to do. We pay our dues directly to the Property Management company at this time. I have had extensive damage from a leaky roof, caused by improper maintenance of the drains by the Property Management Company! 
 
I have decided that the best course of action since I can't seem to locate anyone who will take responsibility for the damage or claims to be part of the Condo Association is to stop paying my dues and instead send a letter to the Property Management company and to the Condo Association at my own address. I will ask them to provide documentation from my Condo Association that states I should be paying my monthly dues to the Property Management company. Then, I will at least have someone to sue! Hopefully, I will get a response. I am naming both the signer of that letter and the Property Management Company in my suit. 
 
Any advice?