Our Enhanced Services
At Czarnowski & Beer, LLP we strive to be much more than just your auditor. While some of our clientele is simply interested in an annual financial statement and tax return, our firm often attracts clients who recognize that working with the appropriate accountants and advisors can help spotlight potential cost savings opportunities. Our renowned professional service programs are designed based on what we believe should be considered when looking for financial management professionals and consultants, and for the ability to withstand public scrutiny on actions taken. We believe that Cooperative and Condominium Board members, including Directors/Managers in the case of a Condominium, are as in the spotlight as much as those of large public companies and government entities. The concerned audience may be smaller, but the risks and level of scrutiny are comparable. Board members will need to reside in the building long after their terms expire.
Our basic procedures include exceptional rotational testing of controls. This encompasses basic inquiry and in some cases, testing of, a wide variety of aspects of your property’s operations. However, these are focused on assessing significant risks in your financial statements, therefore many of our clients endeavor to maximize the cost/benefit relationship by using our experienced professionals in many additional areas.
As our firm added available enhanced services, they generally were expansions in scope or testing of our rotational internal control procedures above the level incorporated into our basic procedures that are implemented for all audit clients. As members of our professional staff have served on Boards at their own buildings, we worked to create other enhanced services which fulfilled the needs for financial management and management consulting that we experienced in our own properties.
Comparable Cost Studies
Our firm has compiled a comprehensive study of annual costs incurred by our properties. We have established statistics for most operating categories. This has allowed us to offer helpful graphic demonstrations of how a given property compares to the norm for comparable properties within our vast portfolio. These graphic demonstrations are offered to clients to whom we have provided audit services. Our staff members are available to discuss the information during regular business hours.
This service is further enhanced by attendance of one of our professionals at a Board meeting to review the study and assist Board members in properly understanding the meaning of its findings. We are available to make recommendations for areas of potential improvement either orally, at the Board meeting, or in a written report. Generally, the most cost effective means for providing these recommendations is orally at the Board meeting.
Study to Determine Financial Viability of Full Energy Audit
This enhanced service allows properties to focus on two of the most popular, timely topics. This service not only provides properties with an opportunity to reduce costs, but it brings cost reduction along with an opportunity to give back to mother earth by going green.
Most New York real estate was built at a time when efficient use of natural resources was given virtually no consideration. In fact, providing an overcapacity of resources was the normal plan. For example, the thought was to provide too much heat, as they can always open the windows if it gets too warm.
After real estate taxes and mortgage costs (for cooperatives only), resources for electricity, fuel, gas and water are among their largest expenses. For most properties, other than small buildings, the only other comparable cost is payroll costs.
The City has recognized the limitations on natural resources and established a “Go Green” initiative. Recent City legislation attempted to require energy audits, at a potential cost of $10,000 to $18,000 per structure. While energy efficiency is a wonderful concept, utilizing a buckshot approach, particularly at that expected cost level, is not realistic given the budgets of our clients.
At Czarnowski and Beer, LLP we support not only protecting of our environment but also protecting our clients. The City Council’s perspective viewed all properties as “energy pigs”, and therefore suggested a blanket approach from which building will benefit. To us, “every building benefiting” is simply not the case. In looking at the feasibility of payback, we do not see that payback calculation for energy efficient improvements are calculated with the cost of the comprehensive professional energy efficiency audits being factored into the equation.
We have found that most properties do not initiate projects to make every system more energy efficient, but rather, they focus on the ones with appropriate payback, that presently are below average. This amounts to less than one-half of all the systems in New York City. If one-half the systems are at or above the “average” range, how could it make sense to audit every system?
The first step in evaluating what makes sense for a particular property rests on determining the current status of all the property’s systems. Only then can a logical approach to a cost effective system upgrade be determined. Czarnowski & Beer, LLP has ascertained the industries criteria for evaluation and established benchmark amounts for many building systems. Using this knowledge, we can offer a one-of-a-kind consulting service allowing your Board access to these criteria and participation in comparisons to benchmarks at a fraction of the cost of a full energy efficiency audit. This process can be completed with or without the costs of an expert coming to your building to observe your specific situation. Our enhanced service allows you to determine how your property compares in a variety of areas and determine the areas with the highest potential return on investment that may be accomplished with your existing staff and management. Until the City mandates full energy efficiency audits, we will remain in the forefront of being available to bench mark our clients’ utilization of resources at a more reasonable cost.
Evaluation of cost savings opportunities
Monthly carrying charge increases have been thrust into the spotlight due to the economic crisis. The increased charges have predominantly been caused by escalation of costs for energy, employee benefits and local property taxes. Given that generally more than fifty percent of a property’s operating costs are non-discretionary, cost cutting must involve more than simply limiting costs haphazardly. Together with your property manager and building staff, we can coordinate with your property a multi-faceted approach to investigating these key areas.
One significant area where reduction in expenses may be achieved is in controlling procurement, purchasing, and security over supplies. Board involvement in these controls may enable reduction of these costs. Many of us who have served on boards have wondered to what degree building supplies could possibly be offered to relatives or sold for profit by building staff to outsiders.
Our offered enhanced services not only includes inquiry into areas we have determined that are susceptible to a large variations in cost, but also checklists for the Board to utilize to assure they maximize the effectiveness of their involvement in the procurement area. In order to offer this enhanced service at an affordable costs, our service generally is based upon us serving as facilitators for self-evaluation of the Boards controls over the purchasing and cash disbursement function. This allows the property to receive substantially all the benefit of two of our expanded internal control engagements related to purchasing and invoice processing/disbursement at a modest cost. This service allows the Board to adapt their own exceptional policies and procedures over expenditures as well as inventory.
Evaluation of new sources of income and receipt of all appropriate income
Beyond consideration of expense reduction, maximizing revenue must also be considered in order to limit monthly carrying charge increases. As a complement to our cost reduction enhanced services, we also offer our “other sources of income” engagement which comes in two distinct concepts.
One service evaluates the types and amounts of fees charged by the property to tenants, owners, visitors and prospective applicants. This evaluation can determine whether the level and types of fees being charged are in alignment with standard industry practices. While we do understand that there is apprehension about “nickel and diming” fellow unit owners, it is important to be aware of whether your property is missing out on revenues from those who don’t follow the rules, that would offset the need for increases to the property as a whole. In addition, in less than complete owner occupied properties, often those who are not fellow unit owners will be subject to fees. It is often observed that tenants who are not owners impose significantly more wear and tear on the property than owners. It’s time to recoup your costs of this added wear and tear.
The second service approach to “other sources of income” involves review of applicable property and managing agent procedures to determine that the procedures assure that you are receiving all of the miscellaneous charges that you are entitled to on a timely basis.
Try this simple exercise: Consider the listing of fees that has been established detailing the fees to be charged at your property. Now consider the frequency you see that revenue being recorded in the accounting records. Other than your confidence in others assessing these fees properly, what assurance do you have that the fees are properly charged and collected?
Even in the best circumstances, simple common errors such as these examples can occur:
- Inadvertent omission of the procedure to review the dates that the unit owner checks were received to assure they were received by the appropriate date and not subject to late fees.
- A ticker system isn’t utilized to assure that a renewal application is filed upon the expiration of a sublease and that the appropriate fee charged.
- A tenant indicates to the appropriate person that they can no longer wish to rent a parking space and the person responsible for assuring the spot is rented doesn’t receive the notification that the spot is available and rent it to another paying customer.
Receiving all of the non-recurring income is directly related to the existence and application of control procedures for your property. We find that many properties adapt a combination of procedures, including those from their managing agent as well as those the superintendent brings from his property. As a result of these combinations of procedures and controls, we generally encounter situations where the controls over miscellaneous income can utilize improvement. We have compiled an exceptional resource for inquiry designed to efficiently determine the appropriate improvements that are necessary to assure a property that all non-recurring income is properly charged, collected and deposited. Once these procedures are established, we remain available to instruct the Board or Finance Committee members on how to monitor that the procedures are followed and that miscellaneous income is maximized.
Assessment Planning to maximize tax benefits
In the current economic environment, in addition to properties needing to raise revenues, so must the taxing authorities. It is widely anticipated that there will be increases in Individual Income Tax rates in the near future, thereby making deductions that are passed-through from properties even more valuable. Those who are familiar with Cooperatives can attest that the first question that is generally asked is “what percentage of the maintenance is tax deductible?” With increasing tax rates, we expect the question of tax deduction for payments from unit owners to take on even greater significance.
In addition to the usual Real Estate Tax and Mortgage Interest deductions that are available, there are other tax benefits that are not based on deduction, but rather provide dollar for dollar tax credits for certain projects that the property undertakes. This type of benefit can go a long way toward rewarding unit owners and reducing the painful “it will cost you this much…” for necessary projects.
There generally is one place that funds come from when they are required, and that is the unit owners. Presentation is everything when requesting funds from unit owners. How often have we heard the complaint “I have no idea what I am getting for all this extra money I have to pay”?
Interestingly, we have seen how the response to requests for additional funds for major capital improvements is received more favorably when the request highlights the additional tax benefits to the unit owners when the assessment is properly structured.
Working with you, we will assure that available tax benefits are maximized as part of the operation of the property.
