It's a typical scenario. The board and managing agent assemble for the regular monthly meeting. Things get lively and everyone participates. The group discusses staff issues, makes decisions about the tile color in the laundry room and directs management to post signs about hot water downtime. Then it's time for the monthly financial report, and a lull falls over the room. While the managing agent and treasurer launch into a discussion about year-to-date budgeted versus actual expenditures, several board membersuncomfortable with discussions involving calculations or financestune out. They flip absently through the pages of the monthly financial report to create the illusion of involvement; but, in reality, they're confused, and hopeful that the financial discussion won't last too long. Eventually the meeting moves on to a new topic and everyone is back in the loop again.
If this situation sounds familiar, you're not alone. It's a common one, not because board members don't recognize the financial aspect of their obligations , but because most boards are comprised (at least partly) of people who have never been exposed to even the most basic accounting procedures. To them, the financial report looks like just so many pages of tiny numbers arranged in neatly-justified columns. The challenge of reading and interpreting the report is simply too overwhelming.
Yet, the financial oversight of a cooperative or condominium is arguably the most important aspect of operations. And the information contained in the regular financial reports provided by management is vital, if property decision-makers are to make knowledgeable, responsible decisions. While there's little that can be done to turn every member of every board into a financial management or accounting whiz, the financial report is an instrument that can be fine tuned to provide this critical information in the most accessible and least intimidating way.
The Best Reports
Good and complete financial reports prepared by management should contain up-to-date, clearly identified information, including a statement of operations (which should contain a budget analysis reconciled to the property's bank statement[s], income, expense, cash flow and necessary footnotes) as well as specifically categorized information about receipts, disbursements, paid bills, outstanding payables, a list of shareholder or unit owner arrears and all information pertinent to a property's unique financial situation. A cover page that summarizes the last month's financial activity at a glance is also advisable.