So How Exactly Should Co-op / Condo Boards Use Their CPA? Like This

• Preparation of the property's annual audited financial statements, based on information usually provided by the managing agent; plus the filing of property-tax returns.

• Reviewing and monitoring of the manager's financial services. This includes bringing to the board's attention any shortcomings in the managing agent's finance/accounting processes or reporting.

• Providing authoritative guidance in all financial matters throughout the year, including how to plan for anticipated and unanticipated expenditures, the actual disbursement of those expenditures and, less obviously, their impact on the property's finances. 

The accountant should advise the board on how bank accounts should be set up for operations, working capital, and replacement reserves.

Additionally, the accountant may participate in the preparation of operating, capital and other budgets, depending upon the extent of the managing agent's participation in preparing these budgets. (Some properties rely exclusively on their managing agents to prepare their budgets, while others engage their accountant for this service, and still others employ a hybrid where the managing agent and accountant coordinate on budget preparation.)

Often, a co-op/condo's accountant is expected to be present at your annual meeting, in order to explain the annual audited financial statement and to answer owners' questions about the financial direction of their investments.

How Accountants Work with Building Managers

In all aspects of an accountant's service to a co-op or condo, it is important for the accountant to have thorough, accurate and timely financial information about the property. For this reason, boards should instruct their managing agent to provide to both the board and the accountant all required reporting documents, including the

• monthly management report
• bank statements
• paid bills
• disbursements
• related paid invoices and
• payroll details.

In this way, the accountant can monitor the building's finances along with the board. This ensures that the managing agent is properly addressing periodic recurring expenses, such as water and sewer bills or tax bills, which may not appear on a monthly report. It also permits the opportunity for educated questions to be asked about any variances, unusual expenditures or unpaid bills.

For example, if the managing agent fails to provide information about arrears, then the treasurer cannot report the status of collections to the board, and the accountant will not have a full perspective on how the building is faring financially.

Often, a CPA will have 

suggestions or solutions

developed from experience.

The managing agent should include the accountant on the distribution list to receive the management reporting documents given to the board. In addition to the monthly financial report, the agent should provide the accountant with board-meeting minutes, so that he/she can be aware of upcoming projects or capital expenditures that the board is contemplating, and provide financial advice that may assist the board's planning.

It is especially important for the managing agent to keep the property's board and accountant informed about any special circumstances that may arise during the course of the year that may affect the property's financial status. For example, we have seen several cases where weather conditions have caused extensive damage to buildings, or where budgeted capital improvements have had significant cost overruns. Often, a CPA will have suggestions or solutions developed from his/her own experience.

The production of annual financial statements, filing of tax returns and provision of authoritative financial advice are the basic services a co-op or condo should expect from an independent accountant. Additional value comes from the accountant's ongoing assistance with future planning to ensure that the building's assets are protected.

Richard B. Montanye, CPA, is a partner at Marin & Montanye, LLP

Illustration by Liza Donnelly

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