As an owner of a cooperative or condominium, receiving your building’s financials may lead to confusion about how money is being allocated. If you are on the Board of your co-op or condo, you may actually be tasked with explaining the content of the financial statement. However, there is no need to panic. There are a few key components to review that will give you an understanding of the financial health of your building.
An auditor’s overall assessment is a good place to start, and it should be a barometer of the building’s financial standing. In previous posts, we have discussed the importance of reserve funds, setting aside a recommended minimum of 10% the average annual operating costs. Therefore, a quick review of the reserve funds will let you know if your building has enough money set aside if there are unforeseen required capital improvements.
Carefully review operating costs, and always confirm that assets at least equal liabilities. And, do not forget to check if operating costs are up from the previous fiscal year. If they are, make sure you can identify the basis for the increase in costs. This will often be answered in footnotes to the financial statement. When in doubt, always get in touch with the building’s managing agent and/or accountant. Finally, as a co-op or condo is often one’s largest investment and asset, achieving financial literacy in reading co-op and condo financial statements should be a priority!