Following the Money The Treasurer/Accountant Relationship

Following the Money

Fall is here and with it comes the season for watching football. Football seems to dominate American culture. There are pro games four days a week, pre-season, post-season and Pro Bowl games, college, indoor, fantasy football, and of course the definitive game of the year—the Super Bowl.

But what does football have to do with co-op and condo management? It’s an excellent metaphor: football is not just about the individual players—quarterback, running backs, tight ends and wide receivers—it’s about teamwork. Famed football coach Vince Lombardi of the Green Bay Packers once said, “People who work together will win, whether it be against complex football defenses, or the problems of modern society.”

As in football, a co-op has its own team of players—including the board of directors, treasurer, accountant and property manager. Each has his or her own responsibilities, but unless he or she cooperates with the rest of the team, the play will likely fall apart, and the team can ultimately lose.

In football, the goal is to get the ball across the goal line to score points; the team with the most points wins. In a co-op board, the goal of the team is to achieve sustained fiscal success by keeping good financial records, obtaining a profit to pay for various repairs and upgrades and other tasks at hand, and organizing a productive checks-and-balances system so all the responsibilities do not fall on one person.

Role Call—The Property Manager

The property manager acts similarly to the quarterback—who calls the plays, throws the passes, hands the ball off or runs with it. “The property manager is the operations person who oversees the daily business of the organization,” explains Calvin K. Clemons, author of The Perfect Board (Synergy Books). “This person collects the revenue and posts it accordingly. In my opinion, this person (or department) should then processes expense payments, but should not sign checks. This person is responsible for the regular financial statements and reports.”

The Treasurer

The treasurer might act like a running back or wide receiver. When handed the ball—or the money in this scenario—they complete the project with the money at hand. Clemons explains that the treasurer has the overall responsibility for the finances of the organization including planning and cash flow analysis. 

“When a significant expenditure needs approval—let’s say $100,000 is needed to replace a roof—it’s the board’s decision as to what can be done with the money, but the treasurer is the one who compiles the information and comes up with the suggested approach to the problem,” says Stephen Beer, a partner at Czarnowski & Beer LLP, a Manhattan-based accounting firm.  

To help the relationship between the treasurer and accountant, it would be beneficial if the treasurer had some financial background. “It would make our lives a bit easier,” says Richard Zendel, a principal of Citrin Cooperman & Company, LLP, a Manhattan accounting firm, “but when they don’t, we try to break it down. When the financials get presented and there are instances when [the treasurer] doesn’t understand something, they can call me and ask me questions and I’ll break it down to make it as easy as possible.”

Board of Directors

The rest of the team—the board of directors—must work with all parties involved. “Directors must be educated and informed that it is their responsibility for the financial soundness of the organization, and that this duty cannot be ignored,” says Clemons.

“It can be delegated to staff and others, but the director bears the weight of accountability, and in fact is liable for mismanagement of entrusted funds.  When directors understand this function, they are more likely to pay attention to the financial condition of the organization.”

The Accountant

Every team needs a coach, and this outside experienced financial professional makes a great coach. With several hands in the cookie jar, the accountant is a vital team player who reviews the money-making decisions and make sure the treasurer and property manager are handling the money correctly and have the interests of the team in mind.

“The accountant serves as the reviewer and ‘checks’ to see that funds are posted to the proper accounts, financial statements are correct, accounting procedures followed and tax returns filed,” says Clemons. “Financial advisors provide guidance, but are not responsible for fund management nor the daily operations of the organization.”

The accountant isn’t involved in every play or at every game. Periodically, depending on the board’s individual relationship with the accountant and what the bylaws state, the accountant will review the records on a quarterly, biannual or annual basis.

“Because the managing agent collects the money and pays the bills, there needs to be a front line defense of monitoring of what they do; an internal control structure,” says Beer. “We, as accountants, rely on the board that they are monitoring the managing agent. The board gets a monthly management report with all the financial reports and copies of paid invoices. We work with the board’s treasurers to make sure they are reviewing that.”

Zendel also suggests consulting with the accountant when something comes up to interfere with the regular play of the game. For example, windows need to be replaced.

“Anything that changes the financial picture—perhaps an assessment or a loan has to be done—the accountant should be involved,” says Zendel. “An accountant knows what’s best for the building financially. The accountant has a responsibility to the board to be proactive and know what’s going on in the bldg, and the best way to do that is to have a copy of the minutes on monthly basis.”

Checks and Balances

In addition to having an accountant review the plays-of-the-month, there are other checks-and-balances that could be implemented for the utmost in protection.

“Regular financial reporting is a strong deterrent to fraud and embezzlement,” says Clemons, who also suggests that no one person should have total control over the financial activity of an organization—there should be no room for a ‘ball hog.’”

“The more people with access to financial information—respecting the confidentiality of the organization, of course—the less likely someone will attempt to engage in criminal activity,” Clemons continues. “There should be several levels of accountability, with each person sharing a portion of the total responsibility. In this manner, one person can ‘see’ what another person has done without directly interfering with the work or process.”

Treasurers should also make sure that the board has been protected with directors and officers’ liability insurance, otherwise known as D&O insurance, since mistakes can be made.

“It protects them against the acts that they do that aren’t fraudulent, but it would protect them from the shareholders suing them,” says Zendel.

Huddle Up

No team goes to the Super Bowl without the ability to communicate with one another. “A lack of communication would not be maximizing the potential benefits that you would have received,” says Zendel. “For example, perhaps communicating with the accountant could have offered a different way of doing things that were more financially beneficial. Maybe in a refinance, this one conversation could’ve saved the board hundreds of thousands of dollars by discussing the situation with the accountant. Also, things that may not appear good to do might be good to do after you consult a professional.”

Now that the players and the responsibilities of the game are understood and the team members are talking to each other, it’s important that the fans, or the residents, understand the game as well since winning and losing affects them just the same.

“Communication is key,” says Beer, “so the best way for the unit owners to understand what’s going on is through newsletters or periodic unit owner meetings. The managing agent answers questions of unit owners and some of the board members are very open and available to answer questions of everyone in the building. Stop them and ask them to have a moment of their time. E-mail has also helped a lot with communication and sharing of information and it can be done at the board member’s convenience.”

More words of wisdom from Lombardi come to mind. “Winning is not a sometime thing; it’s an all the time thing. You don’t win once in a while; you don’t do things right once in a while; you do them right all the time. Winning is a habit. Unfortunately, so is losing.” Get in the habit of winning.

Lisa Iannucci is a freelance writer and a frequent contributor to The Cooperator.

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