What should be expected?
In Arizona, there is only one fairly recently adopted statute that mandates the bare minimum financial reporting by condo and community association management services.
Within six months after the end of the calendar year, state statute requires a financial compilation, review or audit to be available to the members of the condominium or community association. Contrary to what many have heard from accountants, the statute does NOT require that this annual financial report be prepared by a Certified Public Accountant.
To the surprise of PRM Association Management, who have been preparing and providing monthly financial compilation reports to Association clients for over two decades, a number of Associations, many “self managed,” had never produced or provided members with any financial reports. Therefore, the statute was intended to set a bare minimum requirement so members are legally entitled to at least one annual financial compilation, financial review, or audit each year.
Many condo and community association management services, like PRM Association Management have also been producing monthly financial compilation report and providing these to Board Members and other members on request. These timely reports are particularly useful when mortgage lenders and/or insurers request association financial reports as a pre-condition to provide their insurance and mortgages.
Some condo and community association management services, UNLIKE PRM Association Management only provide quarterly financial statements and reports, which make it more difficult for Board Members to stay current with their associations’ month to month income and expense variances.
Since bank statements must be reconciled monthly, it seems reasonable to also prepare and provide monthly financial reports.
Most associations from time to time experience delinquencies in members’ payments, and may not always pay all their bills on time each month. However, many condo and community association management services only produce cash basis financial reports. This means that their balance sheets fail to show any accounts receivables and accounts payables, intentionally omitting very important and relevant financial information.
Some condo and community association management services, UNLIKE PRM Association Management pay all vendors, contractors and utilities from their own Trust Account, for their own ease and convenience. That means that each bill paying cycle amounts of money equaling the sum of each association’s bills payable are transferred directly into the condo and community association management services’ own bank or trust account. Then, typically only one check is cut from that account to each payee, including dozens of individual line items to be paid for numerous associations.
Since this practice greatly increases the risk of comingling errors that may be very difficult to find and correct, PRM Association Management has always maintained individual, segregated bank accounts for each association under management. Then, ALL member payments are deposited directly into each association’s own segregated bank accounts and ALL bills are paid on association checks from each associations’ own segregated bank accounts. This method ensures a clear and transparent audit trail, with documentation needed should questions or disputes arise, so that they can be answered and resolved.
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