The Board

How can boards and owners know they are getting professional management? The monthly report provided by your management company is a guide to the quality of service you are receiving. In any given month, the report summarizes all of the services provided to a property by a management company. The property manager is the point of interaction among the boards, the properties they represent, and the management company.

To be effective in their assignments, property managers today require skills in administration, finance, and maintenance. There are educational programs offered by various organizations and schools that provide training for managers. The information a manager receives from courses does not become knowledge until it is combined with experience.

Financial skills include the ability to prepare budgets using spreadsheet software on computers. The modern manager needs to be able to download data from property management software onto a spreadsheet. The manager then can design macros to carry forward information from prior years and to project income and expenses for the coming year. Footnotes are integrated into the budget to explain special circumstances or variances. Once set up properly, computer automation using spreadsheet skills is efficient and annual modifications are easily made.

On average, a property manager will collect data for six to eight budgets per year and submit them to an account executive. The executive will coordinate this data, and prepare as many as 15 budgets per year. A vice president or director of management may oversee 50 to 100 budgets annually. Given these requirements, it is essential for managers to have computer savoir-faire in order to remain competitive in the industry.

ADMINISTER THIS

Administrative skills for property managers translate into systematically organizing tasks. The difference between competence and incompetence is enormous, and is often defined by organizational skills. It is impossible for property managers to remember everything required of them. Observe whether a manager enters a "to do" item into an organizer book, or enters it into an electronic organizer. Either works, but the electronic organizer is portable, can be edited in the field on a hand-held device, and synchronized on a computer in the office and at home. Contacts can be separated into groups: boards, contractors, vendors, attorneys, accountants, property staff, and so on. Even e-mail messages can be retrieved and sent from any location using personal electronic organizers with applicable operating systems. Information can be "beamed" from one compatible organizer to another. If a property manager does not use an electronic organizer then they must have a paper organizer and date book with them at all times.

Knowledge of property maintenance is another area in which managers must be skilled. Major categories that property managers need familiarity with are: code compliance, heating, ventilation, and air conditioning equipment, compactors, elevators, roofs, water towers, masonry, brick work and façade, windows, and interior design. Property managers cannot be expert in all aspects of maintenance, but they must know their limitations and when to get professional help from a licensed tradesperson, engineer, or architect. Most boards prefer an honest "I do not know but will find out" to a fabricated response.

KNOW THYSELF

It would be extraordinary for a property manager to have mastery of administrative, financial, and maintenance skills. Managers have their strengths and weaknesses. This is where the support that is provided by the property management firm is crucial. Financial and management personnel participate in continuing education at staff meetings and seminars. Experienced financial and management personnel apply tried and true solutions to the challenges they face daily.

Staff supervision and staff meetings nurture the professional development of managers to train them to organize their work to achieve successful completion of tasks. Support staff - secretaries, clerical, purchasing, paralegal, and accounting - allows the managers to be exactly as their title implies. A manager is not a jack-of-all-trades. If the property management firm does not provide adequate support staff, property managers cannot organize themselves to succeed.

The administrative staff that backs a property manager is of utmost importance. Boards should consider the ratio of administrative staff to properties managed, just as they would for a property manager. The longevity in the job of the administrative staff and the property management staff is also a vital statistic. Rapid turnover of staff indicates problems at the management company.

Maintaining accurate records is of the utmost importance. Records create a paper trail for the financial and maintenance activities at a property. They are as important to the life of a property as medical records are to an individual. We trust doctors to maintain our medical records and they must do so according to regulations. In the real estate industry, there are no regulations to require property management firms to maintain records in good order.

Quality record-keeping includes the following components. Accounts payable files are segregated by vendor to include a purchase requisition, invoice, signed delivery receipt, and backup copy of the check for every payment. Accounts receivable is updated daily via a wide area network directly connected to the bank. Accurate cash balances are available at all times. Individual unit files are established to contain every correspondence and transaction with residents.

A management company needs accurate records to service a property. Records provide historical data essential to property maintenance. They also provide a paper trail for work orders, legal matters, and correspondence among the board, management company, and unit-owners. The way files are maintained for unit-owners by the accounts payable and accounts receivable departments is crucial to helping managers carry out their assignments.

A professional management company has a purchasing department to competitively bid goods and services on an ongoing basis. Orders are placed with a signed purchase requisition. Goods are competitively priced and an order is placed, using a purchase order form. Then, once the goods are delivered, the recipient at the property signs the delivery ticket.

When the vendor mails an invoice, it is matched with the purchase requisition, the purchase order, and the signed delivery ticket. All four forms are submitted to the property manager for approval. Before authorizing payment, the property manager verifies that the proper personnel at the property signed the delivery ticket. The manager also makes sure the pricing on the purchase requisition and purchase order match the pricing on the invoice. After ensuring that everything is in order, the property manager approves payment of the invoice and a check is issued.

These purchasing procedures provide multiple levels of control that protect owners' financial interests. The fact that purchasing procedures require the approval of three different departments ensures the proper allocation of funds. The purchasing department acts independently of accounts payable, which in turn acts independently of management. While maintaining a separate purchasing department is an additional expense for a management company, it serves an important function: saving money for owners.

Professional management includes a paralegal on staff to act as liaison between boards and their attorneys. The paralegal coordinates closings for cooperatives and monitors all legal activity at condominiums, homeowner associations, and cooperatives. A paralegal on staff monitors insurance compliance, prepares legal status reports, manages closing documents, and acts as liaison with the properties' attorneys.

A property management company has accounting and financial staff with established systems of checks and balances that protect owners from misuse of funds. The way accounts receivable processes payments and accounts payable pays bills backs up the manager's duties.

Support also comes from accountants on staff specifically assigned to properties to prepare and review financial reports. This further enhances the managers' ability to serve the community. The qualifications of the accounting and financial staff and the ratio of staff to properties managed are indications of the quality of the management firm. The recent events concerning Enron show the value of accounting due diligence.

THE MANAGER'S JOB

What is the property manager's job? The professional management company has property managers with years of experience in construction, renovation, repairs, and maintenance. The professional property manager has expertise in property maintenance and is a team leader to coordinate other professionals on the management team. The professional manager is coordinating the services of support, purchasing, paralegal, and accounting staffs to meet the goals of boards and owners.

All property management activities culminate in the presentation of a monthly management report. The report is presented in a binder divided into major headings. The manager leads the board through a financial report, legal report, correspondence, and miscellaneous items, including contractors' proposals for work to be performed at the property. Boards can easily review events in the life of the property over the past month and fulfill their true function as a decision-making body.

Several factors measure the quality of a management report. One is the efficiency in sending out correspondence and responding to owners. Another factor is the professional presentation of monthly management reports that will ultimately expedite board meetings.

If the management report is properly prepared, it will provide essential information regarding business transacted at the property over the prior month. A format recommended for the management report is to assemble it in a folder with subject headings divided into tabbed sections; "Financial," "Legal," "Correspondence," "Miscellaneous," and "Response." When properly prepared, the monthly report can easily be referenced to assist in predicting, planning and controlling costs at the property.

The following categories should appear in the various sections of the management report:

Financial Section

1. Financial summary of the monthly cash flow
2. Statement of cash flow
a. Actual month-to-date income, expenses, debt service, and other sources
b. Budget month-to-date income, expenses, debt service, and other sources
c. Monthly variance
d. Actual year-to-date income, expenses, debt service, and other sources
e. Budget year-to-date income, expenses, debt service, and other sources
f. Year-to-date variance
g. Annual budget for income, expenses, debt service, and other sources
h. Remaining budget for income, expenses, debt service, and other sources
i. Account balances

3. Drill-down of expenses
a. Payroll and costs
b. Repairs and maintenance
c. Administrative
d. Capital improvements
4. Bank reconciliation reports
a. List of checks not reconciled
5. Expense distribution report
a. General ledger categories
b. Check number
c. Check date
d. Payee name
e. Description

Legal Section
1. Statement of all open accounts
2. Legal status report
a. Unit number
b. Name
c. Sent legal/removed legal
d. Arrears
e. Action
f. Attorney paid/date/ check number/ amount
g. Account charged
3. Sublet status report (cooperatives)
a. Sorted by unit number
b. Sorted by owner's name
c. Tenant name
d. Lease expiration date
e. Comments
f. Rent amount
g. Sublet fee
4. Copies of all legal correspondence

Correspondence Section
1. All correspondence addressed to the management company or the board
2. All correspondence mailed by the management company or the board
3. Copies of service requests sent via mail, e-mail, or web site
4. Responses to service requests received by mail, e-mail, web site, or telephone
5. Board responses to owner requests

Miscellaneous Section
1. Magazine and newspaper articles related to the management of the property
2. Contract information
3. Notices sent to the community
4. Anything that does not come under the other sections of the management report

Response Section
1. All action items that require an immediate decision by the board
2. Contract proposals for services to the property
3. Owner requests that fall outside the scope of services as defined by the proprietary lease, bylaws, or declaration of the condominium
4. Owner requests for a variance to perform work that would otherwise be in violation of the proprietary lease, bylaws, declaration of the condominium, or house rules
5. If the board does nothing else at its monthly meeting, it must make decisions in the response section for the action items in the section.

When a board receives a comprehensive management report, it increases its ability to predict, plan, and control costs. The management report reflects the services provided by a management company. Board members should read the management report cover-to-cover before a board meeting. They should call their property manager with questions about the report prior to the meeting. If the property manager does not have an immediate answer, it can be researched in time for the meeting. Following these guidelines result in efficient management of the property and productive board meetings.