A Budget planning is a key component of any association's operations and preparation, and usually falls on the property manager's shoulders. However, he or she does more than just what the title implies—the manager is a "jack of all trades"—they must oversee daily operations in addition to acting as a liaison to the board on a variety of issues from financial matters to refereeing disputes amongst homeowners.
A condominium development has many physical components, all of which may need significant repair or replacement at a given time. The property manager routinely collects monthly maintenance fees, works with the board on preparing its budget, works with the super to ensure that all building systems are operating efficiently, and must be aware of all repairs being done on the property as well as the vendors being used.
The Most Wonderful Time of the Year
The property manager's duties regarding the annual budget vary according to what management company the building uses. According to Frank Juranich, vice president of finance for C & R Realty, a property management firm located in Englewood, "Some companies, such as ours, have our own financial division with accountants that work on accounts payable and receivable, payrolls, bookkeeping, and collection." He becomes involved with the manager when preparing the budget by going through the year-to-date actual expenditures and then going over pending contracts with the manager, including what's up for renewal and what the contracts might look like. Then, by working backward, he creates a budget and the draft.
Other management companies, Juranich says, have the actual manager handle the preparation process. "Some smaller management companies will have a dedicated financial person for that, and those managers usually do the best they can," he says.
Gary A. Sherman, CPA and partner for Rosenberg Rich Baker Berman and Company, an accounting and consulting firm based in Bridgewater, says the property manager "should be the liaison between the board and the financial management arm of the management company." He says the manager knows the property, the finances, and the needs of the trustees and the association. When preparing the budget, "whether they do it on their own or work with the treasurer or a finance committee, they generally should take the ball by early August or at the latest September so a draft can be reviewed by the board," Sherman adds. "It should not be the CPA's role to initiate—it should be the property manager's responsibility to initiate the process."
Property managers are part of a team that may also include a construction manager, depending on the size and scope of a given project. As is the case when preparing the budget, Juranich says, "[Managers] start with creating a scope of what's going to be done. They work with the project manager who's hired to oversee the actual work, and then they solicit various contractors." The sealed bids are opened during the board meeting, at which time, he says, a contractor will be selected. After that, the managers will oversee the construction and make sure the contractor is doing what he should.
"They should be on-site monitoring the work," says Sherman. "They're supposed to supervise and be the liaison between the association and the trustees. They monitor the progress and report back to the board, because they know what the project should be about." In addition, he says, they make sure the project is going according to budget.
The property manager's financial purview doesn't end with annual budget planning and major building renovations—he or she oversees several other aspects of the condo's financial well being as well. Juranich says those include monthly financial statements, which show the association board how they're stacking up against the budget on a monthly and a year-to-date basis. Managers also monitor the operating front-cash balance, making sure there are ample funds to pay the bills. "Associations get into trouble with cash flow," Juranich explains. "For instance, we had a lot of very difficult weather this past winter, and [plowing, de-icing, and snow removal] has eaten into this winter's budget." He says in a case such as that he will discuss assessments and cash flow with the board, and address whether they under-budgeted for snow.
"That's something the management should stay on top of with me and with the board," Juranich says. "If a manager doesn't watch, the association can get into a very difficult financial predicament, not only from cash flow but from depleted capital reserve funds and from not having maintenance fees paid." Juranich says cash flow is only one of many financial issues that can crop up if they're not watching receivables in the form of the collection of maintenance fees.
Crucial as managerial vigilance is, the property manager cannot keep an eye on every minute financial detail affecting an association. Because of that, Juranich says, "We have our own people that do that, someone in addition to the manager." He says that by having other people monitor the financial details the manager is thus freed up to do what he or she does best - manage.
The property manager becomes an especially important liaison when dealing with the transition of board control from a community developer to association members. "If the developer and the board want to sign off on the transition and there are legal issues, engineering issues, or accounting issues, he's the liaison between the board and the developer, working with the lawyers and all the professional advisors for the association," Sherman says. "He should be aware of what the needs are going forward and whether the proposed settlement is reasonable."
The Last Word
Most decisions within the condo begin and end with the board. "The board of directors usually has the final say, and they have a say in choosing any contractors on a regular basis," Juranich says, and adds that although the property manager initiates annual budgeting, the board has the final say.
Sherman says that because the board of directors is the elected representative of the association, the property manager works at their discretion. "The property manager can give as much input as possible, but ultimately it's the trustees - that's what they were elected for—to run the association."
The best thing a property manager can do, the experts agree, is to be watchful of finances, ongoing projects and disputes. Although his or her role is to initiate many building processes, ultimately their role is to do what they do best—manage.
Michael McDonough is a freelance writer living on Long Island.