Accounting is an integral part of a condominium’s responsibility to its membership. Board members need to take steps aimed at ensuring that their association’s financial reporting accomplishes several key goals.
Fulfill Legal Obligations
Many jurisdictions have statutory law regulating condominium associations’ activities, and regulations may include financial reporting. Failing to comply with recording requirements could put an association’s status in jeopardy. Also, a condo’s membership could have a legal cause of action against the association for noncompliance.
Satisfy Lender Requirements
Typically, financial institutions want to see a condominium’s most recent financial statements when they are reviewing an application for a mortgage to purchase or refinance a unit. Without this information available, a lender’s internal policies may preclude them from extending financing. They may deem the risk of purchasing a unit in a condo without up-to-date reporting to be too risky because of concerns about poor financial management and not being able to ascertain whether an association is solvent.
Apply Best Practices
Good accounting and collection policies make it possible for condos to budget effectively. Condo association financial reporting is an important budgeting tool, and the process of compiling information can prompt improved financial management practices.
Ultimately, both board members and individual unit owners should familiarize themselves with their association’s financial status. Staying informed about monetary matters can prevent unnecessary surprises and hardship.