CIRA Newsletter
September 2013

MayerMeinberg Q&A

Q: Can I use reserve money to offset operating expenses?

 

A: The Board should first review its governing documents (e.g. Offering Plan, By-Laws, etc.) to determine if there are prohibitions against using reserve funds for operating expenses.  Even if there are no such prohibitions, we recommend against this practice.  By their nature, reserve monies are normally being accumulated for future major repairs and replacements to the common property of the association.  If the reserves are depleted to cover operating expenses, the association may be faced with levying large special assessments to cover the costs of future major repairs and replacements. 

 

The above having been said, some associations do establish "working reserves" or "working capital accounts" which are intended to fund non-budgeted expenses, such as emergency storm damage repairs.  

 

Is there an issue you'd like us to cover in upcoming issues? Please let us know. We welcome and value your input.

Condominium and Cooperative Disaster Relief

 

U.S. Representative Steve Israel of New York has bi-partisan support, with Peter King to co-sponsor legislation that would direct the Federal Emergency Management Agency (FEMA) to qualify homeowner associations, condominiums and cooperatives for federal disaster assistance.

 

This bill is an important step in gaining federal disaster relief for all community associations. If passed, this bill would allow these associations to be eligible for federal disaster grants to repair/clean-up their common properties. Currently, when a natural disaster strikes, FEMA does not give grants for such repairs and clean-up. The reason for this is because FEMA considers co-ops, condos and homeowner associations to be businesses rather than groups of homeowners.

 

Please contact your Congressional Representative now to increase the likelihood of this important legislation being passed. To identify your U.S. Representative, click  here.

Collecting Outstanding Balances

Written by Woody Goldstein, CPA - Senior Manager

 

Perhaps one of the most difficult tasks facing the Board of Directors in a cooperative, condominium or homeowners association is that of taking action against homeowners who are delinquent in the payment of their monthly fees.  The challenge arises in this day and age since Directors are acutely aware of the current troubled and unsettled economy, while at the same time they may also be friends of the delinquent homeowners.  Nevertheless, Directors have a fiduciary duty to ensure that all fees are collected on a monthly basis in order to provide the cash flow necessary to pay the costs of operating the association.

 

Economic Climate and Cash Flow

 

Over the course of the past several years, national and local economic conditions have caused an increasing number of homeowners to be unable to meet their monthly obligations.  These conditions have led to the accumulation of significant delinquencies in CIRAs (i.e., cooperatives, condos and HOAs) across the New York Metropolitan region.  Without the necessary inflow of fees from members, CIRAs may find themselves unable to meet their monthly obligations to their vendors without levying special assessments or using their reserve monies.  Delinquencies and decreased cash flow could also cause the Board to post-pone necessary maintenance and other projects that keep the property up-to-date and in good repair.

  

Click here to keep reading.

Principles of Budgeting for CIRAs

 

With summer coming to an end, many Boards find the time of the year approaching when they review the current year's operations in order to begin the process of preparing a budget for the upcoming year.  Reviewing a comparison of the current year's actual results to the budgeted amounts will provide valuable benchmarks that will be useful as initial guidelines for the future.

 

The budget is probably the single most important communication that you as a Board member send to the members of your association.  The budget provides information that is used to determine the following year's monthly fees charged to homeowners.  It can also assist in providing early warning signs if the community is operating at a deficit.

 

In our experience, each community has a different starting point for the budgeting process and their own way of preparing the annual budget.  Some associations have a finance/budget committee which helps the Board to obtain various information, as well as input and opinions from a cross-section of the demographic composition in a community.  In addition these committees can serve to spread the workload when generating a budget. 

 

Click here to continue reading.  


A Capital Idea: Stuart
Is There Ever a Good Time to Raise Fees? 

By Lisa Iannucci - Originally in August edition of The Cooperator

 

These days, just about everyone is cutting back on spending, either to make ends  meet, saving for something special or a rainy day, paying off debt or funding  their retirement. Consumers are cutting coupons, looking for deals and keeping  a close eye on their dollars. Whenever costs or fees go up and consumers have  to pay more, they invariably get upset.   

 

The last thing that residents want to hear is that their association fees or common charges are being raised. Realistically though, to keep a building properly cared for and financially solvent, fees will need to be raised regularly and fairly. Not doing so can force a board to impose a large assessment or a big maintenance increase because they haven't put enough money aside for a major repair or improvement project that has  arisen. 

Continue reading.

 

In The News
Mark Meinberg, 
Managing Partner

LIBN interviewed Mark Meinberg about trends in the accounting industry and the role of the 'trusted advisor.' 
Robert Mayer, CPA
Managing Partner
Robert O. Mayer Co-Managing Partner at MayerMeinberg
 
Robert Mayer was featured in an interview by CPA Practice Advisor.
Stuart Mayer, Partner

Stuart was quoted in The Cooperator in an article titled 'A Capital Idea: Is there ever a good time to raise fees.' 
Jill Schneider, Tax Director
Jill Schneider was featured in Long Island Business News: Women in Professional Services. Click here.
Announcements
Past CIRA Newsletter
  
Click here to view our June 2013 CIRA newsletter.
Firm Newsletter - August
  
Click here to view our general August 2013 firm newsletter.
Contact Us!
 
If you have any questions, issues or comments you would like us to address in the next newsletter, please do not hesitate to contact us.
 
NYC: 212-631-9500
 
Long Island: 516-921-8900
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Mayer Meinberg
6900 Jericho Turnpike Suite 312 | Syosset, NY 11791 | Phone: 516-921-8900
14 Penn Plaza Suite 1011 | New York, NY 10122 | Phone: 212-631-9500