Condo Confidential / Ms. Management
Audits recreate condos financial dealings
Courtesy of The Miami Herald
In 1963, when he had his Bar Mitzvah reception at the Algiers Hotel, native Miami son Monte Kane would have never imagined that, like many other hotels on Collins Avenue, it would be torn down and replaced with a large condominium. Nor would he have imagined that he would become a leading auditor of condos in South Florida -- including for the Algiers' (now the Atlantis) neighbors like the Roney Palace and the Alexander.
''For the last 25 years, I've seen just about everything,'' he says of his work as an association auditor.
Kane was one of the original seven-member team appointed by the American Institute of Certified Public Accountants, and wrote the accounting and audit guide for condos which is now considered by the CPA profession as generally accepted accounting principles in the United States. His Brickell Avenue firm, Kane & Co., represents more than 150 associations, including high-end condo associations from Continuum on Miami Beach to Metropolitan on Brickell, to Reserve in Pinecrest and Toscana North in Highland Beach.
''Our philosophy is that boards are fiduciaries dealing with other people's money,'' he says. ``It's important that they have controls in place and pay attention.''
Brazen association examples Kane cites include property managers who alter bank statements, to more subtle thievery such as using association funds for personal purposes that appear to be proper but over time can add up, such as purchases from Home Depot or a computer.
Florida law requires an annual audit for condo associations with receipts higher than $400,000. For buildings with annual budgets less than $400,000, the audit is optional and far too often boards waive it altogether. Associations with receipts over $200,000 and less than $400,000 must have a CPA review annually.
Each audit takes between six and 12 weeks because of a methodical process of planning followed by a confirmation process and the conducting of audit fieldwork including inquiries of management and board members.
Fees for condos with 200 units are generally no less than those with 800 units. Most quality firms' fees begin at about $5,000 and go up from there. Balance sheets, income statements and cash flow statements are all required. Reserves and special assessments are also considered.
Smaller management companies, which often include record-keeping in their services, do not necessarily do a good job, which means there are countless smaller associations with messy books.
''We are supposed to audit, as opposed to fixing books which sometimes means re-creating the books,'' Kane says. ``Some smaller management companies are clueless when it comes to accounting, and sometimes they need to resort to outside accounting or bookkeeping services.''
Kane says condo boards should conduct a review and discussion of the financial statements each month, including an investigation of any major variances. At the end of each year financial items should be reviewed by a qualified CPA firm that specializes in condo laws.
''When we're doing an audit, we don't care who is on the board,'' Kane says. ``Our responsibility is for the association as a whole, and as a result, a lot of associations don't want us to do an audit because we'll do it right.''
Audits meticulously account for most financial events in a condo's life by re-creating the scene with numbers and receipts. Forensic accounting work is very much a part of Kane's firm. ''It's a little like CSI,'' Kane says, ``without the blood.''
Kane & Co., has two offices, at 1101 Brickell
(305-789-7900) and in Boca Raton (800-677-0441). Other accounting firms that
specialize in condo work include Sokol & Sokol in the Kendall area
(305-273-0008) and Lancaster & Co. in Key Biscayne (305-361-1014, www.lancaster-cpas.com).
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