Common Interest Real Estate Associations
Do you pay various common interest real estate associations dues on your home? If you own a condo, odds are you are on the hook for some type of due or fee assessed monthly or yearly. Can you confidently say you know exactly how your money is being spent? Most individuals would be hesitant to answer that question, which is where CIRA accounting done by an industry expert, like JS Morlu, can assist. Common interest real estate association accounting, commonly referred to as CIRA accounting, is a complex system that requires effective oversight and meticulous procedures to remain in compliance with regulatory bodies and keep members appeased. Handling the high-level of accounting required can be a burden, especially if you don’t have a full board of directors, leading to outsourcing the CIRA accounting function in your best interest.
What Is A Common Interest Real Estate Association?
A common interest real estate association forms when there is common control of certain assets or shared spaces. Common interest real estate associations frequently pop up when you buy a condo or house in a certain neighborhood. Since everyone has a financial interest in the property, there are special rules associated with the accounting. Since the goal of CIRA’s isn’t to make a profit, fund accounting is frequently used, which the average citizen doesn’t have a great deal of exposure to. The primary purpose of the association is to effectively utilize member funds to pay for upkeep and additional improvements. Due to this, a board of directors is usually appointed to handle all money going in and coming out of the bank account.
What Are The Benefits Of A Common Interest Real Estate Association?
Despite the added monthly payment, most members of a common interest real estate association see tangible benefits, especially with an accountant working closely with the board of directors. Among the list of items a CIRA handles includes:
- Hiring contractors for repairs
- Collecting dues from members
- Regulating common areas
- Allocating funds for future improvements
- Handling community disputes
- Setting community standards
When CIRA accounting is done properly, there can be a deterrence of fraudulent activities within the association. Other top benefits of a CIRA include:
- Increased property value
- Less work for current members
- Community bonding
- Well-kept neighborhood appearance
- Proper fund management
- Reduced dues
These are just a few of the benefits that members of a common interest real estate association take advantage of. However, in order to fully see all of these benefits, having an accounting firm, like JS Morlu, frequently reviewing your CIRA’s books will be needed.
How Does CIRA Accounting Work?
As we touched on before, CIRA accounting is different than the accounting for the average mom-and-pop shop. Instead, fund accounting is used to keep track of revenue and expenditures. The end goal of common interest real estate association accounting is full compliance with the AICPA CIRA guide, which outlines the rules and regulations these nonprofits must follow. Most associations will benefit from an audit designed to monitor the internal controls and verify the accuracy of financial reporting, both of which should be done by a licensed and experienced accounting professional. The board of directors will decide on different funds to set up with the approval of members and then meticulously track and allocate money in accordance with the association’s goals. For example, an operating fund would be set up to manage day-to-day expenses while a reserve fund could be set up to save for an improvement, such as a new pool.
Why Do I Need JS Morlu For My CIRA Accounting?
Are you confused on the type of accounting your CIRA needs? If so, JS Morlu is here to help. JS Morlu has a full team of individuals with education and experience in fund accounting to ensure your association is properly handling the accounting function. As an independent party, we can work alongside the board of directors to provide oversight and alterations to processes and procedures, which is beneficial to all association members.
Additionally, we can provide consistency throughout your association, from up-to-date bookkeeping to consistent financial reports and audits, giving your members the transparency needed to place trust in the association. Furthermore, those looking to purchase a home within the association will often ask for detailed information on the financial statements and operations to be sure the dues are justified, and no fraudulent activities are occurring.
What CIRA Services Does JS Morlu Offer?
Building a relationship with a trusted advisor, like JS Morlu, leads to expanded benefits for you and your association. Common interest real estate association accounting can be a burden, especially with an entire community watching the board of directors’ every move. We work with you to put together a detailed plan of services that benefit your specific needs. From monthly bookkeeping and regular financial statements to year-end audit and tax preparation, JS Morlu is your go-to ally when it comes to CIRA accounting. Among the list of services we offer include:
- Bookkeeping – Our CIRA bookkeeping service can be as minimal or wide in scope as your association needs. We will work with you to implement value-added procedures on a regular basis through:
- Monthly bookkeeping including bank reconciliations
- Regular report creation
- Frequent review of delinquent statuses
- Financial Statements – In compliance with the AICPA CIRA guide, we will issue financial statements monthly or annually. The scope can be limited to a compilation or expanded to an audit opinion. Our financial statement services include:
- Agreed-upon procedure
- Consulting – Tricky business situations arise regularly, calling on the need for a knowledgeable business advisor to turn to. JS Morlu can be the team of experts you trust for answers when you need them most. Common consulting areas include:
- General accounting practices
- Internal controls
- Software integration
- Regulatory agency compliance
- Tax Preparation – Most CIRAs need to file an annual tax return to report their transactions for the year. JS Morlu can help you file these returns timely and accurately, ensuring you stay in complete compliance with regulatory agencies.
Apart from that, JS Morlu also offers their accounting services to the following groups:
- Accounting for homeowner associations
- Accounting for property owner associations
- Accounting for condominium associations
- Accounting for business park associations
- Accounting for master planned communities
What Are The Legal Requirements My CIRA Must Follow?
Common real estate interest associations need to file an annual tax return just like any other business despite being a nonprofit. The federal government and some states do impose minimal taxes on nonprofits, such as a state surcharge, requiring an annual tax return to be filed. Additionally, regulatory agencies like to know how the association is doing financially to track any illegal or unethical activity. Moreover, most of the requirements associations have in place are set by members. The government has no interest in controlling aesthetic rules and compliance regulations. Instead, the government focuses on the revenue you bring in and how that revenue is being spent.
What Does a CIRA Audit Include?
Even though a formal audit is often not required for CIRAs, most associations do benefit from bringing in an independent third party. Many associations are reluctant to hire an accountant for an audit because it can be costly and time-intensive, however, an in-depth audit gives critical insight into the operational and financial health of the CIRA. A CIRA audit includes an assessment of the internal controls of the company. Internal controls are the procedures in place to prevent and deter fraud and asset misappropriation. The second component of a CIRA audit is analyzing the financial statements for material misstatements. When the association is not doing as well, board members may feel pressure and alter the books to present a better financial position. This is illegal and has a higher chance of being detected with JS Morlu on your side.
Can JS Morlu Help Decrease Association Dues?
Although JS Morlu does not set the rules for assessing association dues, they can contribute to the possibility of decreasing the amount. When the board and community members have a better understanding of the financial position of the association, they can make stronger business decisions, such as reducing expenditures and finding creative ways to generate additional revenue without raising rates. Effective allocation of revenue with regular bookkeeping by JS Morlu can reduce your association dues in an indirect way, making us an asset to you and your common interest real estate association.
If you are still confused about the reporting, accounting, or benefits of your common interest real estate association, reach out to JS Morlu. JS Morlu has a wide array of experience in Common Interest Real Estate Associations (CIRA) accounting, making us your trusted expert. From taxation to audit compliance, we’ve seen it all. Our services are tailored to meet your common interest real estate association needs. We promise we will work relentlessly to provide you with top-notch service, helping you stay in compliance and keep community members happy. Reach out today to schedule a consultation to see exactly how your common interest real estate association can benefit by working with JS Morlu.