Organizing and keeping a co-op or condo’s books and other records is, on the surface, not that different than keeping a  budget for one’s home.  

 But there are many important differences—filing deadlines, tax requirements, reports, avoiding costly penalties and more.  As difficult as balancing the numbers for your apartment may be, doing the same  thing for, say, 60 or 100 housing units is infinitely more difficult. The fact  that there are detailed rules and laws governing condo and co-op financial  records makes it even more important to “take care of business,” as it were.  

 In Your Corner

 While you don’t have to be an accountant or another financial professional to understand all  of the basics, it’s a good idea to have a financial professional in your corner, giving you  advice. That doesn’t mean, however, that boards and managers shouldn’t have a working knowledge of the basics themselves. With this in mind, we asked  several certified public accountants how boards and managers can get their  financial house in order and keep it that way.  

 As we’ve mentioned, there are several basics that any board member should know about  his or her building. Board members should have a working knowledge of both the  general operating budget and the capital budget, the source of funding for  capital projects, and the amount of the building’s reserve fund.  

 “A well-done management report and financial statement will give the board member  information about the mortgage on the property, accounts payable, accounts  receivable and cash positions,” says Mindy Eisenberg Stark, CPA, whose office is in Scarsdale.  

 Stephen Beer, CPA, a partner in the accounting firm of Czarnowski & Beer, LLP in Manhattan, recommends that board members get a budget comparison  report, done on a monthly basis, detailing activity in the building’s bank accounts, reserve funds, a list of unpaid bills and an analysis of  arrears.  

 Jules Frankel, CPA, a shareholder in the accounting firm of Wilkin & Guttenplan, P.C., with offices in Manhattan and East Brunswick, N.J., adds that  the board members should have reports that allow them to compare the actual  budget with the projected budget and make decisions based on this information.  They should also know what major capital projects are coming up and be able to  determine these projects’ major funding source.  

 And Carole Newman, CPA, a partner in the Syosset, Long Island-based accounting  firm of Newman Newman & Kaufman, LLP, says that “knowledge of the outstanding debt and debt per unit is essential as well.”  

 On the subject of bank accounts, Mike Esposito, CPA, a partner at Kleiman & Weinshank, LLP, in Manhattan, says it’s important that board members and managers know their bank accounts and  investments. “Many clients have numerous accounts,” he says, and can lose track of some of them.  

 Common Mistakes

 While there are many mistakes that board members and/or managers can make when  it comes to financial record-keeping, some mistakes are more common than  others.  

 Beer says that in his experience, coding mistakes are common—for example, classifying a capital item as an operations expense. “We all have these systems, where you type in a name that’s on the check [into the computer] and it brings up the last time the name was  used [and the way that account was classified]. This is common on all kinds of  software.”  

 The information about, or function of, that particular vendor or other entity,  of course, may have changed since the last time you dealt with them.  

 Another mistake, Beer says, is using operating funds for reserve purposes. “It’s easy to just write a check from your operating budget. Unless you run out of  money, you may not see this,” he says.  

 “Other misclassifications,” says Newman, “include the categorization of repairs, i.e., classifying a heating repair as  plumbing, etc.”  

 Importantly, Esposito relates that when condos or co-ops switch management firms  and agents, documents can get lost in the transition or go into storage.  Sometimes these documents can impact individual shareholders or unit owners.  

 That’s why many people recommend that the board itself have duplicate copies of all  documents—tax returns going back at least seven years, payroll taxes, and more.  

 Finally, Frankel, asked about common mistakes, answers, “Not passing a realistic budget—trying to keep fees artificially low” even when the development can’t afford doing so.  

 Key Deadlines

 What are some of the key filing and/or payment deadlines affecting buildings in  the city?  

 Among them, according to our experts, are corporate tax returns, financial  statements that many banks require, an annual real property income and expense  report due September 1, real estate taxes real estate tax protest dates, water  and sewer charges, payroll tax returns, 1098 forms (a form filed with the  Internal Revenue Service that details the amount of interest and  mortgage-related expenses paid on a mortgage during the tax year) tax  deductions to co-op shareholders and more.  

 All of these items have to be filed on time. And many, if not all, have  late-filing penalties—often stiff ones. “Real estate taxes, water and sewer charges, corporate taxes, they all have late  charges,” says Beer.  

 How do co-ops differ from condos when it comes to financial paperwork, filings,  recordkeeping and disclosure? We already know the intrinsic difference between  co-ops and condos: in a condo you actually own the unit from the walls in,  whereas in a co-op you own the shares in an entity that owns and holds title to  the land and building.  

 “The real estate rebates in condos,” says Beer, “are the property of the owners. In a co-op, the building keeps the money. But in  condos, the unit owners have to push management to give it back.” Often, he says, it seems to slip through the cracks. Some published reports say  that often, condo boards will pass assessments that are covered by the amount  of the rebates.  

 Making Things More Efficient

 How can condo and co-op administrators streamline their buildings’ financial profiles to make them simpler, more transparent, more efficient and  less likely to result in missed deadlines, missing paperwork and penalties?  

 Beer advises managers to use industry-specific software specially designed for  apartment management rather than generalized software, to “issue their monthly reports on a timely basis by the fifth of the month,” and have the property manager review financial reports at the monthly meeting.  

 Esposito, saying that “each agent is different,” outlines several steps for board members: have a good internal record-keeping  system, have control sheets telling you when things are due, follow up on what  your CPA is doing, have copies of papers for agents who want them.  

 Frankel, who calls such efficiency measures “a function of the management company’s back-office and accounting department,” says that management should institute “appropriate ticklers” (reminders) to make sure that each one of the buildings are on time with tax  filings, quarterly reports and other important deadlines.  

 He also says that management companies need to be aware of certain real estate  rebates that come back to buildings, depending on the building’s age; of real estate incentive plans for newer buildings; and of laws to  encourage development and reduce real estate taxes in some areas.  

 They also, he continued, have to be aware about upcoming Local Law 11 (in New  York City, building façade) inspections and their financial ramifications—“how much will the scaffolding cost, how much will the engineering costs be, what  are the other expenses being incurred.”  

 In general, boards should be sure that they have a good management company to  manage paperwork flow and give copies and information to the board members,  says Stark.  

 The information in this article is very minimal, but there are many resources  that are available to interested co-op and condo boards and property management  companies.  

 According to Stark, “they should consult with their accountants (for tax advice, financing issues and  assessment and maintenance information) and their managing agent (specifically  for the budget).” They should, needless to say, have a competent accountant with experience in  the field, as well.  

 There are several organizations with extensive resources and extensive knowledge—the Council of New York Cooperatives and Condominiums (CNYC), the Federation of  New York Housing Cooperatives and Condominiums (FNYHC), the national Community  Associations Institute (CAI), the New York Association of Realty Managers  (NYARM) and others. And, last but definitely not least, both management and  boards should remember to read industry publications like the Cooperator.  

 Raanan Geberer is a freelance writer and a frequent contributor to The  Cooperator.