BAD OVERSIGHT, P.2

Emergency work, naturally, cannot go through the bidding process. "You can't bid a pipe break in the wall or an emergency elevator breakdown," says Neil Davidowitz, president of Orsid Realty. "To protect yourself, you want to know in advance what the hourly rate is on the mechanic and his helper. And you need to have a log in the building to keep track of their hours."
To be fair, most boards don't have the time to be involved in everything — otherwise they wouldn't need to hire outside professionals. But boards can't put their heads in the sand and miss seeing the red flags. Among the steps you should take:

Be wary of being "yessed to death," as one Brooklyn co-op treasurer puts it. "They'd say, 'Yes, we're taking care of it,' and then at the next meeting, you'd go back and say, 'Where's the memo we drafted?' It would be forgotten. If they keep saying, 'Yes, we're on it' and there's no follow-through, I'd be worried."

Check and double-check. At the monthly meeting, the manager will report on the status of the accounts payable and receivable. The the treasurer, at the very least, should check these figures against the actual invoices received. That's how one building found that its money had gone to pay the expenses for a job at another property.

Have a annual certified audit, and maybe smaller outside audits in between. Every building should have an accountant-certified audit in which everything is checked against the original paperwork. A less expensive "compilation audit" simply adds up the numbers the manager presents, without any investigation. If you're worried about your accounts, says Arthur Weinstein, an attorney in private practice, you can also have quarterly audits performed. "It's not as thorough," he notes, "but it can bring up irregularities."

Know your documents and deadlines. If your treasurer is on the ball — i.e., familiar with the pertinent financial documents and deadlines — you won't have to rely exclusively on the manager. "It's a red flag when you have a very predictable expense like the real estate tax and you're told you don't have the money to pay it," says Samson, "People will use an excuse that, if they say it real fast, sounds good, but when you investigate it, smells. They say in December they don't have enough to pay the real estate taxes? Well, they could have known in September if they had been on the ball."

Educate yourself. Be involved enough to know what you don't know – and know what questions to ask. A Brooklyn co-op with an asbestos problem was shocked to find that the two contractors bidding on the removal had together incurred dozens of city and state work violations. The directors subsequently hired an engineer to give them a crash course in asbestos removal so thatthey would know the right questions to ask when the bidding process began again.

Prepare a regularly scheduled spreadsheet of projected and actual expenses. As a way of navigating through all this, the treasurer should prepare a monthly, quarterly or annual spreadsheet of the budget, with projected and actual expenses laid out clearly side by side. You'll be able to see easily the overall state of your finances.

Be sure your treasurer reflexively questions. "You want the biggest pain in the ass to be the treasurer," argues Samson, who says you want him or her "to be compulsive and ask a lot of questions. In that case, when there's an embezzlement or a scheme, they'll steal from someone else who's not looking as closely!" Agrees Weinstein: "The treasurer is the key player … the primary watchdog."

In the end, however, the buck doesn't stop with the treasurer. It stops with the board. It is, after all, your home, your money and ultimately your responsibility. If the boat sinks, you can always blame the manager. But you're the one who will drown.

Adapted from Habitat May 2008. For the complete article and more, join our Archive >>