A new condo tower
As these financial statements show, this new condominium tower got off
to a very bad start.
Statement of
Financial Position
Assets
Common element fees receivable
$48,533.76
This often means that there are $48,533.76 in unpaid condo fees. Check
this
figure against the figures from previous years to see if this problem
is growing.
Ask the treasurer and the president what the board is doing to recover
these unpaid condo fees. This is no joke. I have seen a condo
that
wrote $40,000 a year off the books as
un-collectible debts.
Question:
Ask the auditor if all the receivables are unpaid condo fees.
Interfund Balance
($125,000)
This is a negative figure because it means that the board transferred
$125,000 out of the Reserve Funds and used it to pay operating costs.
This money, in theory anyway, must be returned—with interest—to the
Reserves. In practice, this never happens and in the future the owners
will face a special assessment or a huge increase in fees.
These two figures tells the owners that the corporation is not bringing
in enough money to
pay its bills. The $48,533.76 that are in arrears is dragging the condo
down.
These figures show that the corporation is running an large operating
deficit.
General
operations
Revenue
Interest
If the budget calls for a few hundred dollars in interest and there is
none, then the operating funds are next to zero.
Expenses
Utilities
$587,643
Question:
Ask the auditor if the utility expenses include payments for late
payments and penalties for not paying the bills on time or extra costs
for running an unpaid balance.
If the auditor won't or can't answer the question, ask president and
the treasurer if the utility expenses include payments for late
payments and penalties for not paying the bills on time or extra costs
for running an unpaid balance.
A single figure for electricity ($290,924) is not broken down for you
into the cost for the power plus service charges and any charges for
late
payments and missed discounts for paying the bill on time.
If no one can/will answer this question, then I would vote against
renewing the auditor's contract and I would state, at the owners
meeting, that you have lost confidence in the board's competence.
After the owners meeting, submit a written request
to
the manager to examine the previous year's monthly utility bills.
Balance, end of
year ($219, 067)
This means that there is a large operating deficit. Check it against
the previous years to see if this deficit is growing or getting smaller.
Reserve
Operations
and Fund Balance
Balance, beginning of the year $178,000
Balance, end of the year
$286,540
This was complete bullshit. These figures is
what the board said the condo had in the reserve fund but those numbers
existed only on paper.
On the front page of the auditor's report, the auditor added in a
qualification. He stated that there was only $96,534 in the reserve
fund which is less than the $286,540 that the Reserve Fund Study said
was required.
The true Reserve Fund balance may (or may not) be seen in the Status
Certificates.
When someone new moves in, ask if you can take a look at their Status
Certificate. The number shown there should be correct for the date
specified. (Watch for old dates such as: "At the end of the 1st Qtr" or
"At the end of the last fiscal year". That may have been months ago.
The audited financial reports for many troubled condo corporations may
have a
similar look and feel as this one.
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