They don’t call it “the bottom line” for nothing. When all is said and done, pretty much everything in business (okay, pretty much everything, period) comes down to money. In most business situations, a company CEO or president has the final word on money matters; the HOA business model dictates that fiscal responsibilities are shared between the board and the managing agent. This complex relationship demands managers embrace understanding, communication, and serious patience when it comes to HOA money matters.
A Learning Curve
The major difference between the way HOAs govern their money issues lies in the fact that often, the major decision-makers in an HOA aren’t necessarily qualified to do the job. Of course, anyone with an investment in a building is personally qualified to speak on a matter affecting that investment, but that doesn’t mean they actually know what they’re talking about. A board might be made up of a veterinarian, a homemaker, a musician, and a serial vacationer—sounds like a fun group, but one fit to make major financial decisions? Not so much.
Carl Cesarano, CPA with New York-based accounting firm Cesarano & Kahn says, “The biggest headache when working with HOAs is that you’re working an industry where the board is made up of just average folks. You don’t always have an accountant or someone who knows about the building industry providing direction. You can get just about anyone up to speed, but often the main problem is that you’re not dealing with a professional in a treasurer position. You really have to have individuals on the board who are willing to take the time to learn what they’re doing. A lot of times, people will want the title, but they don’t accept the role as such—not because they’re bad people, but because they just don’t know how to do the job and they don’t have much help.”
The first way a board can get on track is to understand why they are there in the first place. This helps a great deal in putting everyone on the same page, long before one dime is saved or spent.
Jules Frankel is a shareholder at Wilkin & Guttenplan, an East Brunswick-based accounting firm that has worked with over 800 HOAs on their financial pictures. Frankel says that a position on a board is an even bigger responsibility than most people think. “I believe that the primary responsibility of the board of an HOA is to maintain property values within the community. That’s the starting point,” Frankel says. “In doing so, they have a responsibility to make sure they have monies for insurance, landscaping, snow removal, etc. on a daily basis as well as moneys for deferred maintenance and replacement funding. I also think HOA boards have a philosophical responsibility, which is to have people pay as they benefit from something.”