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.”