Board members have a number of responsibilities and face many different challenges - and managing the building's finances is chief among them. But since most board members aren't trained financial professionals, what is the best way to make sure you're doing a proficient, effective, and thorough job? Having a good relationship with your accountant and financial advisor - as well as clearly defining and understanding their role - is essential, but board members must also be willing to learn about the basics of their co-op or condo's financial documents to ensure that their building is financially sound.
In order to take an active role in managing and keeping track of a building's finances, it's important for board members to familiarize themselves with the types of documents they may encounter in the financial statement. There are three major financial statements included in an annual report: the balance sheet, the income statement and the statement of cash flows.
"¢ Balance Sheet: This document is precisely what it sounds like: a sheet that tells you what you had and what you owed - your assets and your liabilities - all in one place and in easy-to-digest form. It illustrates your building's debts and obligations, as well as incoming funds, and helps you determine your bottom line.
"¢ Income Statement: This covers all your bills and expenses.
"¢ Statement of Cash Flows: This reports the cash receipts, cash payments, and the net change in cash resulting from the operating, financing and investing activities of a business during a period of time. This reconciles the income statement that is on an accrual basis back to changes in cash basis of accounting, according to Stephen Beer, an accountant with Czarnowski & Beer in Manhattan.