Condominium Financial Management
CFM continues to be the premier financial management provider to community associations in Northern California. We are a family run business bringing a personal touch to our clients, while maintaining the advantage of a professional corporation. At CFM, building and maintaining client relationships is our top priority. Our principals are always accessible, and every client is assured the same level of expertise and quality control in the handling of their account.
The first step in the financial management process must be the proper billing and collection of the assessments as approved by the board of directors or membership. Our system is designed to be flexible with the needs of the association. We have the ability to bill the membership on a monthly, quarterly, annual, or other basis.
Courtesy statements are used to notify each owner of their account balance and any other charges related to their property ownership. The statements are detailed for the last 30 days and indicate all charges and payments applied to the unit since the last statement. Balance forwards are also indicated, if applicable.
Owners are informed of their due date and delinquency date directly on the statement. The board or management company may provide short messages to be added to the statements as a quick means of communicating announcements or holiday messages, etc. We are also able to insert a newsletter or other form of communication with the statement mailing at no additional cost to the association.
Our software program allows owners to use the internet to log in and check their account activity and balance. Depending on the bank chosen by the association, owners may also pay their assessments in one of the following ways:
- Lockbox, using personal check or online billpay through their financial institution.
- ACH, automatic payment debited from the member’s account on a specified day each month.
- E-check, payment through our website linked to the association’s bank on the day chosen by the member. Same day application of payment applies, so payments can be made on the due date without application of penalty.
- Credit Card, a nominal fee will apply if the homeowner chooses to use a credit card to pay their assessment fee through the bank. (This fee is charged directly by the association’s bank and does not involve the association or management.)
Billing of assessments is done on an accrual basis of accounting, which means the revenue indicated on the budget comparison report will always match the budgeted amount as approved by the board or membership. Our detailed aging report, provided in the financial statement package, will indicate those homeowners with balances or credits. Debit balances will be tracked by number of days delinquent and collections activity will be noted on the aging as well.
Delinquencies & Collections
Delinquences & Collections
The Board of Directors has the fiduciary responsibility to protect the assets of the Community. One of the assets to be protected is the accounts receivables. The board is empowered by their documents and California Civil Code to bill and collect assessments, and take the steps necessary when owners fail to pay.
The first step in this process is the creation of a Delinquency Control Policy by the board of directors. This policy is based on the powers defined in the CC&R’s and California Civil Code, and summarizes the steps to be taken in the event of a delinquent assessment. This policy should be given to management for implementation in order to ensure the even application of the procedures to all members.
Through our contract with the Association, CFM is empowered to implement the Delinquency Policy. We begin by billing the monthly, quarterly, semi-annual, or annual assessments as applicable. These statements serve as a “courtesy” reminder to the homeowner of their obligation to pay their assessment. The owners are required to pay their assessments whether they receive their statement or not.
If an owner fails to pay their assessment by the delinquency date as established in the policy of the association, a late fee is assessed. This late fee may not exceed $10 or 10% of the assessment, whichever is greater. After the application of this late fee, we will mail a “red” statement of delinquency to the owner to notify them of their missed payment, and subsequent application of late charges.
If the assessment remains unpaid for 30 days, the balance of the owner’s account is subject to interest. This interest may not exceed 12% per annum or 1% per month. If the assessment continues in its delinquency for another 15 days, the account has reached the 45 day mark, which now includes two months of assessments. At this point a delinquency notice will be sent to the owner giving them 10 days to bring their account current, or their account will be sent to collections.
The collection company is chosen by the board of directors, and a contract is signed to develop a relationship for the next phase of collection activity. The collection company should be one who specializes in the collection of community assessments. They will begin the process of placing an assessment lien on the property, which puts the Association in a protected creditor position. They will handle the process of collection through resolution, with all costs directly passed through to the homeowner.
Our accounts payable specialists have a primary focus of receiving and processing our client’s invoices. Invoices are reviewed and coded according to the Association’s budget. Upon entering invoices, our system has controls to warn about duplicates. After invoices are entered, for our clients taking advantage of our web portal, an email is sent with notification to review and approve invoices online. Once approved on the portal, the board member’s signature is electronically generated and a check will be printed in our office for disbursement to the vendor. For those clients who prefer to continue to receive paper checks and invoices by mail for review, a package will be sent after invoices are entered. All invoices are approved, and checks are signed, by the treasurer of the board. If two signatures are required for operating checks then a second board member will sign checks prior to disbursal. Reserve checks require two signatures at all times. CFM does not sign checks for any of our clients. We print operating checks on different color check stock than reserve checks to clearly identify the fund used and for easy identification for signature purposes.
CFM has a comprehensive system of checks and balances to ensure the proper handling of the funds of our clients. We have cross controls with accounts payable handled separately from the bank reconciliation process. The financial statement write up team reviews all the coding and descriptions before final report distribution. The financial package contains the check register for all checks written in each month for additional review by all board members and financial committee members.
CFM is unique in that our sole focus is the financial management of our clients. What does this mean to you? It provides our clients with a level of service unequalled in the industry. We have two senior staff members whose primary task is the preparation of our client’s financial statements. Every check written is reviewed, all accounts receivable postings checked for accuracy, bank statement reconciliations reviewed, and journal entries prepared and posted prior to the printing of the financial statements. Once printed, variances are reviewed and all balance sheet accounts are verified against supporting reports. Every financial is presented in the same order every month for ease of review by our clients.
Our business model has always been to provide reports on a full accrual basis which gives the most accurate financial reporting possible. The California legislature finally recognized the importance of this type of reporting when they passed a law requiring the books and records of the association be maintained under accrual or at least modified accrual basis.
We also provide fund accounting with complete and separate reporting for operating activity and reserve activity. This results in the operating assets, liabilities, and fund balances reported separately from the reserve assets, liabilities, and fund balances. If the association has cost centers or additional funds created for litigation or special assessments, etc, we will customize our reports for these expanded reporting requirements.
Our basic financial package includes the following:
- A cover letter with a listing of the reports to follow
- Balance Sheet
- Budget Comparison Report for both Operating and Reserves
- Bank Statements and Reconciliations
- Accounts Receivable Aging
- Check Register
- Accounts Payable Aging
- Monthly General Ledger
Our software is very comprehensive and can provide many more reports upon request. We will work with the board to provide the financial package that is most useful for their review and will gladly work with the board to aid in their interpretation and understanding of the reports presented.
In addition, we offer a board portal where monthly financial packages are scanned and stored. The board can access historical reports at any time, at their convenience.
Upon request, CFM will assist or prepare the annual budget package and annual policy statement as required by Civil Code sections 5300 & 5310. We will also coordinate with your reserve study preparer to provide the information necessary to complete the study and/or annual update.
Our draft budget is a full narrative containing descriptions and clarifying questions for the board and/or management. Our system is fully integrated giving historical data alongside projections for the coming year. The draft will be sent along with the detailed general ledger to each board member, manager, and budget committee member. CFM will attend budget workshops to facilitate finalizing budget numbers upon request.
Once approved, CFM will assist in writing the cover letter, preparing any required attachments and disclosures, and distributing the full budget package and policy statements to the membership within established Civil Code deadlines.
The general ledger is the most important historical document maintained by the management company. This report provides a record for every entry made on behalf of the Association including all accounts payable, accounts receivable, and general journal entries.
CFM includes the monthly general ledger as a standard report with the financial statements. At year end, after the books have been finalized and closed, CFM prints a year to date general ledger to be kept as a hard copy historical record for the Association.
Upon notification from a Title Company and a written request related to an open escrow, CFM will prepare a demand to that escrow. If the unit or lot has been turned over to collections, CFM will work with the collection company to make sure a demand is prepared with all amounts owing to the Association. Our demand will notify the buyer and seller of the total due from the seller and the amount expected from the buyer. We typically request two months prepaid of assessments plus fees for the buyer’s account.
The seller is responsible for the outstanding balance due on their account and any special assessments to be accelerated at sale. All amounts owing are subject to negotiations between the buyer and seller as to who will be the responsible party for payment. Our role is to ensure all amounts requested are collected at the close of escrow.
If requested by the Title Company or seller, we will provide copies of the documents of the Association including the Articles of Incorporation, CC&R’s, By-Laws, pro-forma budget package, year end financial statement, and any other disclosures provided to this office to be distributed to third party buyers and their representatives.
CFM will also contact the manager or board to inquire as to any outstanding fines with respect to the property to include in the demand for payment.
Updated on 2016-10-12T15:50:28+00:00, by .