I will come back later on the topic, but just one thing that caught my eye...

"if I want to be an enlightened shareholder...and possibly serve on the board in the future."

Even if you need a flashlight to become enlightened, there should be no excuses for not taking the interest and serving on the board. There are many areas that a board oversees and needs to take decisions that require plain common sense. Similarly, not all board members have to be lawyers, accountants or engineers so that talents may be shared. What a board member needs is above all common sense, fairness, desire to participate, learn and work for the good of the community, honesty and an open mind as well as willing to leave the nonsense out.

So, don't let you or others deter what you think will be to your benefit as well as others. If you started to inquire about the figures and what they mean, you are in the right path. Attend the annual meeting and ask the accountant if pressent to provide more information on those items that catches your fancy on the report. Remember, there are no stupid questions, but stupid answers.
AdC

What to do when asking accountant for explanation of a particular item on the financials & you are given an answer or non answer & brushed off.

I assume you're asking the co-op's accountant and that you're not on the board. (If you're on the board and he/she won't answer, get a different accountant.)

The accountant may feel that he/she doesn't have to answer a shareholder's specific question because he/she cannot bill for that time.

I would ask the board treasurer, and if the treasurer doesn't know the answer off the top of his/her head, ask for an answer by the end of the week (or something like that).

If you still have no response, ask the treasurer again. If you haven't heard back, ask the board pres. If you still have no answer ... you have a recalcitrant board. Ask the question at the annual meeting, and, better yet, get a few other shareholders to repeat the question after you if you get a brush-off.

I'm curious to see what others suggest.

Steve

You may ask the independent board accountant any question regarding the audited annual report. After all, the accountant certified, based on management records, the accuracy of the report as far as how it was prepared.

The accountant may not know day to day information because the independent accountant is acting in a capacity of independent auditor, i.e., it takes the figures from the management's accountant and spot checks expenses and receipts to ensure that consistent accounting practices have been observed. A co-op may engage the auditor to do more frequent audting on records, i.e., quarterly, semi-annually, etc. to ensure that management practices are followed consistently and also ensure better knowledge o the records. IN the process, the independent accountant may be more careful with the way capital reserves have been spent.

If you were to ask questions to the accountant, you may first ask a friend who knows about accounting to review it for you and provide you with some insight. The person may provide you with some relevant questions that you should ask at the meeting.

AdC

Tell them that was not an adequate answer and ask again. And keep asking until you get a more satisfactory answer. Do not allow anyone to brush you off. Especially when it comes to your money

Put questions in writing to which were not answered & after sending numerous letters & a mandate from the board, was eventually answered with same answer given previously & no supporting documentation which would have actually answered the questions. It was also documented to accountant approximatly $70,000 missing according to the managment report for checks paid which were actually not & for money placed into a "phantom" account which has disappeared as shown in the management report. $$ have been missing for over a year & to date no response or comment from accountant. Board is apathetic with the exception of a few who are in an uproar over missing $$. I am banging my head against a wall!

As AdC says, one thing board members need is common sense. The same goes for shareholders who look at a financial statement to determine a coop's financial health.

Bill Gates once said, "A key to understanding how well the dollars and cents are spent is understanding the decisions and sense behind their outlay." Allan, compare figures for 2006 v. 2005. If a liability category was much higher in 2006, question it. Why were apt repairs $85K v. $25K? Question whatever jumps out at you. Check "Administrative Miscellaneous". It includes items like phones, messengers, printing/postage. Money may be spent unnecessarily on such items, or extraneous costs may be buried in there.

Check "Account Payables." Some unpaid bills carry into a new year, but if they were $180K v. $55K, ask why. It could be due to tax/insurance/fuel hikes. Or unexpected costs in a specific year for, say, legal fees. It could signal that funds aren't being managed well or the coop isn't taking in enough money to cover its regular expenses.

There's a lot to consider in determining a coop's financial health, but common sense should alert you to what seems right or not, whether you're a board member or not. Another quote from Bill Gates: "I'm not as concerned with the facts and figures as I am about the facts behind the figures."

Both BP and AdC are absolutely correct in both their points.

Let me add a couple of things to look at on your financial statement.

Under "Assets," check to see how high the "Cash & Cash Equivalents" is. That's the money in the bank -- savings. It's the money that pays the everyday bills, and it's the money held back for a pipe break, facade work, or boiler breakdown. That is, major expenses. The bigger the amount, the less likely shareholders will have to face an assessment.

(So how big is big enough? Our accountant says a rule of thumb -- and it's just that, not a rule -- is to have reserves equal to three months' maintenance. If you don't have that figure, and if you want to know how to find it based on your financial statement, respond to this post and I'll walk you through it.)

Second, under "Liabilities and Shareholders' Equity," look at the Income category. This will show how much money comes from sources other than the maintenance fee. There are probably several categories.

You may see an assessment or a surcharge, for example. Those are typically added to maintenance fees, which you will pay (unless those charges have ended; ask your lawyer or a neighbor).

Of all the other income categories: Add them together. Are they together more than 25% of the maintenance income (called "carrying charges")? If so, that's a good sign that the building makes money in ways other than charging shareholders. Typical categories are rental income from retail space and the fee from having cell phone attenae on the roof.

Then, below all the expenses, look at "Excess after depreciation and amortization." You want that number to be positive, because it's the co-op's profit (in very general terms). That's money that goes in the bank to save for a rainy day -- for emergencies, capital improvements, or a remodeled lobby.

Finally, read the supporting notes. Accountants say that these are the most important parts of the financial statement. The notes will tell you what's going on financially, what the big purchases were, the size of the mortgage, whether the co-op has other loans or a line of credit, how many apartments are still owned by the sponsor (if any), and any significant event that happened in the new year by the date of the accountant's letter (the cover letter).

For example, an accountant told me that in one of his client buildings, he had to include mention of a fire that happened in, say, January 2005, even though the financial statement was only for 2004 and 2003. That's because repairs to a fire would have a financial impact on the building.

Good luck!

I've just come across another source of good questions for the novice to ask about financials. It's in the April 8 Times real estate section, a whole article about questions to ask before buying (one section section is about the financials).

It has to do with comparing certain categories year to year (if your statement shows two years: the current and last year's numbers).

If you can't find it on-line, a library can for you.