If there were metaphorical rock stars in the financial management of a homeowner's association, those rock stars would be known as the treasurer, accountant and building manager. These three are the power trio of the co-op and condo finance world, taking the unabashed lead in keeping their association in the black. They might not get a lot of applause from the residents—simply because those residents might not know exactly what they do—but rest assured that they have their fans on the board. And like any good rock band, the key to longevity is a good working relationship.
Who Does What
So what's the secret to an effective working partnership between treasurers, accountants and managers? First, it helps to define each person's role, a role that may change from building to building. For the most part, an accountant will handle an association's annual audit and provide advice on questions that may arise during the year. Those incidents could include the need to structure a special assessment or recast a budget for an extended period of time to account for rapidly rising costs in an unexpected area of the budget - fuel costs, for example. "We can also help them with financing," says Gary Rosen, CPA, CFE, of Wilkin & Guttenplan in East Brunswick.
Property managers are hired by the association to handle the day-to-day operations of the community. They take care of everything from the physical property to inquiries and complaints from residents to correspondence to financial matters. The manager may be on-site or work through a larger management company. He or she will serve as the main liaison between unit owners and the board, and will work directly with the board treasurer.
The treasurer will serve a pre-determined term and is elected by the community or appointed by the board, if there is a vacancy. "They can have a lot of power or a little power, depending on the size of the community," says Gary Sherman, CPA, of Rosenberg Rich Baker Berman & Co., in Bridgewater. The treasurer will do everything from reviewing invoices to signing checks to handling the books.
Dan Weixeldorfer, treasurer of Ramapo Ridge II in Mahwah, describes a wide range of duties under his purview. He meets weekly with the management company to go over bills and sign checks. He also does the yearly budget with the help of the management company, and presents an overview each month to the homeowners at the open board meeting. He will give them an understanding of the association's financial shape and a projection of how the finances will look in the future. As a member of the board, he also gets a vote in making community-wide decisions.
Depending on the size and structure of the building, the individuals actually disbursing the cash, paying the bills and handling the day-to-day finances of the building could either be the treasurer or the building manager or a combination of the two. For big decisions, however, it is the board itself that wields the ultimate power of yes or no. The treasurer will talk with the manager to get recommendations, then will report back to the board who will make the determinations. For the most part, accountants stay out of these daily decisions, reserving their expertise for the annual audit or more specialized issues that require specific experience, contacts, training and insight.
When it comes to the successful management of an association's finances, the ability to juggle a lot of tasks concurrently and still maintain a steady line of communications between the jugglers is of paramount importance.
Perhaps the biggest project that the accountant, treasurer and manager will be involved in is the yearly audit, the review that lets the board and the unit owners know that everything is being run smoothly, effectively and most importantly, on the up-and-up.
During the audit, the accountant will examine a variety of things. They will look at the full year-to-date general ledger, the list of cash disbursements, bank reconciliations, investment accounts, assessment receivables, assessments received each month and services. They also will be checking to make sure that major financial decisions have been quantified in meeting minutes. "Investment decisions, hirings, firings, reductions in maintenance fees, all of these things should be documented in the minutes," Rosen says.
Accountants also join forces with the treasurer and building manager on other issues, including providing advice on significant cash outflows or structuring special assessments or even recasting budgets for extended periods of time to handle unexpected and disruptive price increases in services or products such as fuel. "We can also help with securing financing," Rosen says.
Playing it Straight
Treasurers, accountants and managers all hold significant financial power and authority over a co-op or condo association. Board members and residents put their trust in them to do the right thing. How do they maintain that trust, and ensure that everyone involved plays by the rules?
Rosen, Sherman and Weixeldorfer all agreed that a system of checks and balances is imperative. "It's a good idea to have certain controls in place because ultimately, they all have a responsibility to the shareholders," Sherman says.
One must is multiple signatures when it comes to check signing. Weixeldorfer says he signs checks for the association but gets a second signature from the property manager. Other associations might have those duties shared by their treasurer and board president. Different formations will work as long as the principle of shared responsibility still applies.
Board members also "should never be signing checks without also showing a contract or invoice," Rosen says. Something that shows a date will help prove that the items or services being purchased are actually being done.
It also helps to have a second set of eyes double checking financial records. "Someone other than the treasurer should be reviewing the financials each month," Sherman says. That can be important since the accountant is generally only involved once a year. Weixeldorfer gives weekly and monthly reports to the board on expenditures.
And if the treasurer prepares the monthly report, everyone on the board should see it, Sherman says. "A copy of the bank statement should be attached so everyone can see the canceled checks to make sure no kiting or any other irregularities are taking place," he adds.
If anything ever does go wrong in terms of fraud or the mishandling of funds, the board should be fully protected under directors and officers (D&O) insurance, providing at least some piece of mind for those in charge. That does not mean, however, than anyone involved with the management of money and bearing a responsibility to homeowners should be anything less than diligent. "If the accountant sees problems, he should bring it to the treasurer or the board as a whole," Sherman says. People need to talk with each other, and not be afraid to ask questions if something seems strange.
If there is any single thing that can guarantee a smooth and trust-filled working relationship between accountant, treasurer and manager, it has to be communication. "My accountant is available to me for any questions I might have," Weixeldorfer says. "The property manager and I speak on a weekly basis to go over projects and repairs, owners who are late on monthly fees, bids for work, and contract bids that we send out for things such as landscaping, snow and painting. We have a very close relationship, bouncing things off each other."
Sherman believes close communication is especially important at the beginning of a relationship, when a new client may have questions or need clarification on things. In addition to coming out annually to do the audit, he would spend time going over the report and making suggestions. Indirect forms of communication such as newsletters, seminars and other group exchanges of information can be extremely helpful as well.
Treasurers and other board members should not be shy about asking questions either. "Good communication is the number one thing," Weixeldorfer says. Ask a lot of questions before you enter into something so you are not going into it blind and so you can explain it to the board members when asked about it."
It is important that the property manager maintain an especially close relationship with the building that they service. If he has a question, Weixeldorfer says he can pick up the phone and call his manager about anything. "I either speak to him then or he gets back to me in minutes, even after-hours. This is why it is important to hire a first-class property management team. It makes the board's life so much easier…."
If the accountant, treasurer and manager can create a cohesive team, one built on trust and communication, an association should have no worries when it comes to matters of dollars and cents.
Liz Lent is a freelance writer and a frequent contributor to The New Jersey Cooperator.