The Partners’ Corner – Special Assessment Accounting
Each month, we will feature one or two questions submitted by our board members, residents and employees that will be answered by a KWPMC subject-matter expert. If you have a question, please submit your questions to email@example.com.
Q: Dear Robert: After Hurricane Irma, our community had to pass a special assessment due to the damages that were incurred. Can you provide us with some guidance or best practices for special assessment accounting and how we can best track the costs associated with it? – Janice L., Miami, Florida
A: Dear Janice:
I am sorry to hear that your condominium sustained damages during the recent storm. Here are my thoughts on some accounting best practices to ensure that the effects of the storm don’t also seep into your ledger:
- Determine the association’s cash position. Where are funds coming from to pay for hurricane expenses?
- Isolate and segregate hurricane related expenses for insurance claim purposes and to track the amounts for a potential special assessment.
- Obtain estimates from contractors to approximate total hurricane expenses.
- File an insurance claim.
- Read the governing documents to determine if there are any restrictions on the board if they try to obtain a loan or approve a special assessment.
- Obtain financing. Most banks were offering speedy approvals for line of credits with the option to convert into a term loan. This is important when determining the payment methods the board will present as options to the association.
- Determine the payment options the board will offer its owners. Depending on whether or not the association secures a line of credit, the board has the authority to give owners monthly payment options. A line of credit allows the board flexibility to allow owners to pay over time than immediately to recover from hurricane related expenses.
- Meet with the association accountant and attorney. The accountant will provide the unit breakdown with and without financing. Check with the association attorney so they may draft the proper special assessment mailing for the 14-day notice in order to approve special assessment.
Thanks for your question and good luck with the repairs and recovery.