The Accountant and Condo Finances
While the attorney reviews the legal issues and the engineer focuses on structural concerns, the condo board will want a certified public accountant (CPA) to assess the condo association's financial condition by conducting a post-transition audit. The audit's purpose generally is to verify that the condo developer managed the condo association's funds appropriately, accounted for them properly, and created a solid financial foundation for the new condo association. On the income and expense side, the accountant will want to determine whether the condo developer has collected all revenues owed to the condo association, paid his/her share of the condo association common expenses on condo units the developer owned before they were sold, paid outstanding bills and properly allocated expenses. The condo association wants to be sure the condo developer did not classify as condo association expenses and pay with condo association funds costs for which the condo developer should have should have been responsible.
On the condo budget side, the audit should evaluate the condo developer's expense and income projections to determine if both are reasonable. The accountant should tell the condo board in particular if the common area condo fees are realistic. Condo developers sometimes set the condo fees at an artificially low level while marketing a new condo association to increase the appeal to prospective buyers. If an audit determines that to be the case in your condo association, the condo board will want to identify the problem and make any necessary adjustments, increasing the condo fees if necessary. The longer the board leaves artificially low condo fees in place, the more financial problems the condo association will face, and the more painful the inevitable correction process will be for condo owners. The developer transition audit report combined with the condo reserve replacement study the engineering firm produces will give the board the information it needs to develop a realistic condo association budget and to determine how much the condo association should contribute annually to its condo reserve fund. In terms of the long-term financial health of the condo association, few decisions the condo board makes will be more important than these.
