The Dual Financial Role of an Asset Manager

The Dual Financial Role of an Asset Manager

The Dual Financial Role of an Asset Manager 2560 1706 Matthew Adam Properties

By Ira Meister President and CEO – Matthew Adam Properties, Inc.

Of the many issues an asset manager deals with, one of the most important is finances. 

While much focus is on the daily, monthly and annual monitoring and reports, often overlooked is the importance of a long-term plan for capital projects.  Though recommended by the American Institute of Certified Public Accountants, many managers and boards give short shrift to this document. Failure to account for upcoming projects and how to finance them can blow a huge hole in a property’s finances and lead to large increases in monthly charges or special assessments.

A diligent manager supported by a strong and experienced accounting staff manages both short and long-term components, keeping a co-op or condominium on sound fiscal footing.

Let’s look at these two areas.  Several areas impact on operational finances.  A leading cause of financial difficulties is poor bookkeeping as we see from properties transferring from other companies. A partner in an accounting firm that works with numerous co-ops and condominiums and who has a good perspective on this told me, “Probably the most important responsibility is making certain the financial records are complete and there is sufficient information for the accountant and the board.” The accountant also said he values asset managers who get the information to him in a timely manner.

Today, most properties use a financial software program.  The accountant warns that with numerous products some management companies, particularly smaller ones, try to save money by buying inferior programs. The building is the loser in these instances. And remember, the software is only as good as the information inputted.

Another vital role is preparation of the annual budget. In some buildings, the board does the initial budget, in others it is the managing agent or the accounting firm, or most often a combination.  But, the accountant says, when the accounting firm reviews the budget it is critical that the managing agent provides accurate historical information on usage of fuel, water, and electricity as well as other expenses, both year-to-date figures as well as past numbers. This is central to projecting expenditures.

Many co-ops and condos take a narrow approach to long-term planning to keep a lid on maintenance or common charges. Failure to maintain an adequate reserve fun, delay preventive maintenance and necessary repairs or doing just the minimum are undermining a property’s fiscal integrity. 

This can be avoided if the board is forward thinking and develops a long-term capital improvement plan. In most cases, this is a five-year program that identifies projects that will be required, prioritizes them and identifies funding sources.

Preparing such a plan requires the coordinated efforts of the property manager, an accountant, the superintendent/resident manager and an engineer. The first step is gathering information about the physical plant and systems. Effective superintendents/resident managers know their building and can pinpoint areas that would require work particularly smaller items that could lead to larger projects unless attended to. The engineer performs a complete inspection of the building including the exterior, the roof, public areas, and mechanical systems. Included is research into available tax incentives and rebate programs.  Some of these have deadlines and others are available on a first-come basis.  Knowledge of these can help in setting project priorities.

Once this information is gathered, costs are estimated and schedules set based on need and spreading out the cost to lessen the impact in any given year. Then, the board can determine a financing plan.

By having all the information, the manager can get a big picture view of what is required and bundle similar projects based on the systems or work involved.  One example would be having work requiring scaffolding done in sequence avoiding the need to have the scaffolding put up for each project at a much greater expense.

By focusing on both the short and long-term financial issues, an asset manager working with the board can keep a co-op or condominium in solid financial shape.