Management of a condominium community is much like the democratic government of a small town. The budget process is remarkably similar, whether it’s fees or taxes being collected, and, as in local government, financial management is a transparent system based on Generally Accepted Accounting Principles, or GAAP.
Given that the majority of HOA board members are not trained financial professionals, how can an all-volunteer board manage the finances of an entire community? The answer is manifold; cooperation with trusted experts, plus familiarity with some association finance basics is a good place to start.
A Team Effort
How does a board achieve financial stability? Is it merely a combination of watching what it spends versus how much it accumulates? That's part of it, says Mary Faith Radcliffe, a principal with RCP Management Company in Princeton, but there's more to it. It's a team effort based on the input of several different entities.
“The board is the fiduciary for the association,” says Radcliffe. “As such, they need to make sure they have knowledge of the association’s finances and spend adequate time on financial planning...to insure that the association members are as protected as possible from financial disasters.
“The manager,” Radcliffe continues, “is responsible for providing the board with the best information possible so it can do its job in an efficient and professional manner. The manager should evaluate the association financials and make recommendations to the association members. This requires a manager well-trained in association financial analysis.”