David Allen Stockman, former director of the U.S. Office of Management and Budget, may have had the federal budget in mind when he said that, "None of us really understands what's going on with all of these numbers." But he might just as easily have been talking about condominium and townhome budgets, as well.
Fortunately, regardless of the nature of your common interest realty association, (which consists of condominium, homeowner or community associations), a certified accountant can help make sense of its vital financial statistics. Karen Sackstein, whose firm Karen P. Sackstein, CPA, works with 245 CIRAs in New Jersey, says that she tries to present financial information to board and association members in easily-digestible form.
"A lot of [board members] don't have a financial background," Sackstein says, "so we try to put it in simple terms, so they can understand it."
The Magic Triangle
The actual role that an accountant will play in overseeing the financial affairs of a particular association can vary considerably, and depends both on the nature of the property and on the level of service provided by its management company. Jules Frankel, of Wilkin and Guttenplan, P.C.—the largest providers of CPA services to CIRAs in New Jersey, and the second largest in the country—describes the relationship between CIRA, management company, and accountant as a "magic triangle."
"The board has ultimate responsibility for everything that goes on in an association," Frankel says, while the management company often handles both physical property management and financial management, keeping the association's books and preparing its annual budget for the upcoming fiscal year. Frankel says that accountants are typically called in to perform independent audits of the books kept by management companies—or, in the case of self-managed associations, by their bookkeepers—"And at times, to give input into the budget process when asked or required," as when an association lacks sufficient reserve funds to cover a major repair or replacement project. "Our role is not as substantial as the management company's," Frankel says.