7 Financial Must-Do’s for Condo Corporation Success
“To have a successful community, your condo board must take its fiscal responsibility very seriously,” says Glenne Manlig, president of FirstService Residential in Alberta. “Effective financial stewardship is the key to enhancing both property values and resident lifestyles.”
A good place to start is by following some critical financial best practices.
1. Create a budget that works.
The framework for your condo community’s success is your budget. To develop a good, workable budget, you’ll need to have certain documents on hand:
- Budgets from prior years
- Financial statements
- Service contracts
- A list of accounts currently in arrears
- Your reserve fund study
- Monthly management reports
- A list of projects and events you’d like to undertake
- Corporation documents
Using these documents, establish the important sections of your budget, such as “utilities” and “reserve fund contributions,” and fill in the relevant line items. Add the source of your income as well (condominium contributions, interest, etc.). When you are satisfied with the final budget, make sure to use a good software tool to keep track of your finances. An experienced condominium management company can also provide expertise.
2. Keep finances top of mind.
Having a budget is not where financial responsibility ends. In fact, it’s just the beginning. Your condo board should continually focus on the corporation’s finances by:
- Seeking cost-saving opportunities in your insurance policies and contracts.
- Establishing an investment policy.
- Planning capital improvement projects
- Being diligent about collecting delinquent fees.
- Keeping a healthy amount of capital.
3. Get more value for your money.
Yes, it is important to look for savings. However, giving up quality should never be the tradeoff. Make sure you are working with qualified vendors, and beware of hidden costs with any “great” deals, such as unexpected expenses resulting from change orders. Other ways to save money are by buying bulk quantities of items you use frequently and by taking advantage of any federal, provincial or local grants.
4. Get the right insurance coverage.
If you think property or casualty insurance is enough, think again. Having inadequate coverage can create serious problems for your condo corporation. Verify that you have the appropriate amount of liability protection, and look into whether you need a policy for excess liability. Other coverage you should have includes:
- Directors and officers (D&O) liability insurance to protect board members
- Fidelity insurance to protect against theft
- Workers compensation, even if you do not have direct employees. (It also covers contractors.)
5. Make your money work for you.
Your reserve fund can create an income stream for your corporation if it is properly invested. Make sure that any investment is CDIC insured so that your money is liquid and safe. This means using investment vehicles like Guaranteed Investment Certificates (GICs) rather than stocks, municipal bonds or corporate bonds.
6. Protect the corporation with internal controls.
The best way to prevent financial misappropriations is by separating certain financial duties. In particular, the person responsible for depositing money should not be the same person who records receipts. If your condominium management company handles your finances, make sure that the company separates these roles, too.
7. Conduct regular audits.
Your condo corporation’s accountant should do a yearly audit to ensure that your financials are being handled correctly. If your corporation is small, you may only need a “review,” which is less costly.
Certainly, there are many other ways to build your condo corporation’s financial strength. Start with these best practices and your community will be well on its way toward a successful future.
Learn how an experienced condo management company can help you create financial stability. Contact FirstService Residential, Alberta’s leading condominium management company.