Our small self-managed condo building (8 units) is a few years old, and now that we've dealt with some other pressing issues, we are contemplating whether we need to start doing annual financial audits. We are not concerned about wrong-doing; it's a relatively small budget and our treasurer provides monthly financials which we review. We've also tried to be pretty responsible financially - we are... [more]
Our small self-managed condo building (8 units) is a few years old, and now that we've dealt with some other pressing issues, we are contemplating whether we need to start doing annual financial audits. We are not concerned about wrong-doing; it's a relatively small budget and our treasurer provides monthly financials which we review. We've also tried to be pretty responsible financially - we are building a reserve fund and are properly insured. However, we're concerned that there could be issues with mortgage lenders if we do not have audited financials, since one of our board members was told that annual audits are a requirement for most lenders. Does anyone have any real life experience with this? If you live in a small building, do you have audits, and if not, have there been any issues with resales in your building?
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Response by lad
over 13 years ago
Posts: 707
Member since: Apr 2009
I'm not sure what is required of condos, but I think audited finances are a good idea and probably not that expensive. The attorneys I know who specialize in small buildings usually look at audited financials along with D&O insurance as signs that the board is running the building with some degree of professionalism.
I'm the Treasurer of a small co-op. We have audited financials. I'm fairly sure we were required to have audited financials in order to get underlying mortgage financing. I actually don't recall being asked for them for individual share loans, but most of what I've had to do are refinances v. new purchases. For refinances, some banks did not ask for any information aside from the underlying mortgage details, and some were OK with self-reported income and expenses (all six or seven lines of them, lol).
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Response by Mikev
over 13 years ago
Posts: 431
Member since: Jun 2010
The answer is in your offering plan. It will state what you need as ours clearly states that an audit must be provided within 4 months of year end.
I have not had my lender when i refinanced ask for the audited financials of the building, but it could depend on the bank.
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I'm not sure what is required of condos, but I think audited finances are a good idea and probably not that expensive. The attorneys I know who specialize in small buildings usually look at audited financials along with D&O insurance as signs that the board is running the building with some degree of professionalism.
I'm the Treasurer of a small co-op. We have audited financials. I'm fairly sure we were required to have audited financials in order to get underlying mortgage financing. I actually don't recall being asked for them for individual share loans, but most of what I've had to do are refinances v. new purchases. For refinances, some banks did not ask for any information aside from the underlying mortgage details, and some were OK with self-reported income and expenses (all six or seven lines of them, lol).
The answer is in your offering plan. It will state what you need as ours clearly states that an audit must be provided within 4 months of year end.
I have not had my lender when i refinanced ask for the audited financials of the building, but it could depend on the bank.