Not everybody on a co-op or condo's board is an accountant (or can even balance their own checkbook, for that matter.) Handling the money for an entire association is a big responsibility however, and residents rely upon their board to make good financial decisions on behalf of the entire community and to protect its individual and collective assets.
Although the terminology is different, and the dollar amounts and orders of a much larger magnitude, at a fundamental level, managing the finances of a building or condo association is not so very different than managing your own finances. What is prudent for the latter is prudent for the former, and the mistakes people make managing their own money—using credit cards to pay for fixed expenses, for example—are the same ones board members often make.
Here are some financial basics, as well as a few common mistakes boards make when dealing with their proverbial pocketbooks—and how your board can avoid them.
The Birth of a Budget
According to Elmhurst-based accountant Brad Schneider of CondoCPA, the complexity of an association's budget varies depending on the size and sophistication of the association. “The larger the association, the more areas that will probably need more expertise,” says Schneider. “Most high rise condos in Chicago have budgets laid out by the manager, who goes line by line and tries to predict how much their service contracts add up to for the year.”
If a building or HOA leaves the budget-making up to their manager, it's vital that there's clear communication and transparency between both parties. “It depends on how much confidence you have in the manager,” says Schneider, “but as a board, you certainly want to review the budget. Some boards are more interactive that they'll get more involved with the operations.”