Cesarano & Khan
The Lay of the Land
I attend a lot of annual meetings. When the re-elected or newly elected board of directors has its first meeting, there is a very large expectation gap between what many directors believe their job functions are and what they actually should be. If you look at the bylaws, it’s pretty clear. In many instances, the people who get elected never ran a business before, nor have they ever run a real estate company. My first question: “Do you understand what you’re supposed to do?” Often, the response is: “I’m not being compensated, and we have a managing agent. We also hired you as an accountant, we have an attorney, and we have engineers. I just monitor what’s going on.”
I may be oversimplifying the issue, but the bylaws are pretty clear. The treasurer is the backbone of the board. He or she is responsible for making sure that assets are protected, that the maintenance, common charges, or HOA fees are properly billed and collected, and that expenses are paid. The treasurer is an integral part of the operation. In brief, all board members are officers and they are responsible – and that involves a lot more than just monitoring.
One of the interesting things about co-ops and condos is that they have an outsource model, unlike large corporations. Most companies will hire an independent CPA to audit their books and records. It is the company’s treasurer who makes the representations on behalf of the company and is responsible for making sure all the reports actually go out, such as the audited financial statement. In the co-op/condo industry, however, the CPA – not the treasurer – is often making that representation.
So what should this uncompensated, volunteer treasurer do? The good news is that if you receive a little training on how to read a management report, and how to interpret it and compare it to your budget, this job could be done in under an hour every month. This could be accomplished with a sit-down with your accountant. What you would learn is that this corporate review is not that different from what you might do personally each month. For example, you might check that your paycheck was successfully deposited electronically. In the corporate version of this you would ask, “Did all our maintenance or common charges come in?” If they didn’t, you look at who didn’t pay. You have a list of arrears.
You would do the same with respect to expenses. Many of these are pretty much the same every month: mortgage payments, for example, or real estate taxes, or insurance. But many of them are variable. You want to look at the reasonableness of those expenses, taking notes on anything that is out of line and following up with the managing agent, accountant, engineer, or whoever is appropriate. Unless you’re an accountant, it may be unreasonable to expect you to know everything. But you should strive to make a good-faith effort to understand your job. You should sit down with the professionals and discuss it. Proper communication will ensure that your co-op or condo is fiscally sound and that your assets are protected.