Unless you have a degree in accounting, your first board meeting could come as a bit of a shock. You probably knew board members oversee the finances of your association but who knew there were so many records to produce and filing deadlines to meet?
Whether or not you have a management firm handling the affairs of you community, “Board members need to know what it costs to operate an association,” says Matt Zifrony, a director at the law firm of Tripp Scott in Fort Lauderdale. “Time and time again, I've seen boards getting beaten up because they were well over their budget. Well, they probably didn't know what it costs to run the building.”
In other words, you’ve got to know what’s in the books and reports of the association. And really, you should have some idea of what forms need to be filed with whom and when to file them and the penalties for failing to meet deadlines. “Each member of the board of administration of an association has a fiduciary duty to the members of an association and the fact that the community association is a not-for-profit corporation does not exempt any board member from his or her fiduciary status,” says attorney Joshua Krut of the law firm of Weiss Serota Helfman Pastoriza Cole & Boniske in Fort Lauderdale. “Board members cannot use inexperience as an excuse if they make unsound business decisions, and must perform their duties in a reasonable manner and with the care and responsibility that an ordinarily prudent person would exercise under similar circumstances. In order to make responsible business decisions for the association, a board member must have a thorough understanding of the association’s finances.”
Looking at the Essentials
The Budget: As the fiscal year comes to a close, it is important for boards to revisit their budget, which was established many months prior as an estimate to the income and expenditures of the community.
“What I try to focus my association clients on is the budget from last year as compared to the actual expenses for this year,” says Zifrony. “This allows them to see where the association was off, both in a positive and negative way, so that as the year is winding down, are there things that the association needs to come back in expenses to account for the fact that they were off? Are there areas that the association over or under-budgeted, so that going into the next year, they are able to better budget for those items,” he says.