TEACHING FINANCIAL STATEMENTS, P.2

"There's no magic to this kind of thing," says Joe Knight, author of Financial Intelligence: A Manager's Guide to Knowing What the Numbers Really Mean. "You want to stay away from the accounting," he advises. "A lot of people say, ‘Let's teach accounting and they'll understand.' But most people don't have a background in this and don't want to learn those skills – they just want to know what the numbers mean. Use metaphors and stories, and try to make the numbers come to life with real-world examples that help the [listeners] understand. Stay away from minutia," he says.

Gary Ziprin, CFO at Midboro Management, says that at the Scarsdale, N.Y., co-op where he lives, "Once a month, the board holds a forum where shareholders can discuss their concerns and contribute their ideas. Usually one board-member volunteers [his or her] time. … [A] handful of people come on any given month." If you take a similar tack yourself, you can have the building's accountant or even a financially savvy resident give a one-hour "class" on how to read a financial statement. Offer refreshments and bill it as a social, community-building event, which it is.

Visuals aids? "I think graphs are beneficial," says Neil Davidowitz, president of Orsid Realty. "You can say something over and over, but you show a pie chart with the operating side of a building – with the big three fixed costs of mortgage interest, real estate taxes and payroll – and you make it really clear where dollars are going and how little of the budget is discretionary."

Joseph McDonald, president of the Waterways at Bay Pointe condo in Moriches, Long Island, says his board makes "view-graphs – a transparency of the annual report pages – that we show on an overhead projector, like back in high school in the day." At the Castle Village co-op in upper Manhattan, "The treasurer and the president [at the annual meeting] do a whole PowerPoint thing on the finances," says the property's attorney, Theresa Racht, a partner at Racht & Taffae.

To reinforce information, keep up a regular flow. "Maybe sometime mid-year you want to give an interim report," suggests Abe Kleiman, a partner at the accounting firm Kleiman & Weinshank. Add a regular, pithy, "educational corner" to the building newsletter. Recommend easy-to-follow books and websites.

It takes an expenditure of time to help make sure everybody understands what the financials mean. Bu ultimately, as Orsid's Davidowitz says, "We're fiduciaries to the shareholders, and if we can assist them and give them education, it's a good thing. They have a right to understand the financial condition of the building."

Adapted from Habitat December 2007. For the complete article and more, join our Archive >>

Art by Danny Hellman