What Boards Should Know About Finances Keeping Your Community in the Black

Money, money, money. The world runs on it. And your building’s well-being depends on it.

The issue is not just having funds, but managing them. Handling the finances for an entire building or association is a major responsibility, and boards—even those made up with seasoned members—need to stay on top of their community’s performance. That means checks and balances, oversight, and holding people accountable. “Board members are charged with a responsibility to make sure the resources and funds are being properly administered,” said Richard Holtzman, president of Prairie Shores Property Management in Chicago.

From reading statements to making sure accountants and managing companies are doing their job, here’s what boards need to know in order to protect the assets of  the residents who rely on them.

Expenses and Reserves 

The most obvious and crucial thing to understand are your building or association’s basic expenses and reserves. First, there needs to be enough cash flow to manage those expenses, which include utilities, salaries for employees, real estate taxes, management fees, and – in the case of a co-op – an underlying mortgage or loan, explains Stuart Halper, an attorney and the president of Stuart Halper & Associates, a management firm in Westchester, New York.

And keep funds in your reserve account. “Because buildings age out and you have to do capital repairs, you want some money going into reserves,” Halper says. “A good guideline is 10 percent per month should go into a reserve account. You want to carry a balance of at least three to four months of a building’s expenses in reserves.” 

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2 Comments

  • excellent information , Could you provide the names of publications and articles to read, and seminars hosted by advocacy and educational groups to attend. I am a newly elected trustee and am dealing with a big capital outlay project for our building and want to know what questions to ask the contractor and communicate the need for this project to our community in a way they will accept it. It is going to cost a lot of money.. Can we as an association have a special assessment, increase in condo fees, and get a loan from a bank to help pay for the project? Any information you can provide will be most gratefully received. Thank you.
  • I am a newly elected treasurer of a very small condo complex consisting of 16 free standing homes. 4 of the homes are low income dwellings (40B) of which the the owner has a 2.5% "beneficial interest" and 12 homes of which the homeowner has a 7.5% beneficial interest. Our expense budget proposed for next year will require an increase of $4,000-$5,000 , approximately, to meet our actual expenses that we expect to incur. What is the formula used to calculate the homeowners' monthly share based on the "percentage interests"? Can you give an example?