Audited financial reports are being prepared as we speak and will be issued to owners & shareholders in the next few weeks. In New York State, The Business Corporation Law requires them to be issued before March 31 each year. Does your building abide by that law? If it doesn’t, it surely needs a Finance Committee.
In order to run at optimal fiscal efficiency, co-op and condo boards should set up a qualified Finance Committee. This will assist them with the overall financial oversight of their business; yes, their business, for that is first and foremost exactly what your cooperative or condominium is.
Just like any business, you need “new blood” that contributes new ideas and looks at a building’s operations in a fresh, new way. Many co-ops and condos have a board that is generally older, have been serving on the board for many years, and who are comfortable (perhaps too comfortable). Others may be run by some very accomplished hedge-fund manager, whose reward for spending an extra hour per week at the hedge-fund instead of on building matters, is likely much greater.
A finance committee with a broad financial background and expertise is something that can make a substantial difference and be a very effective tool. Good finance committee members are a combination of people who run their own businesses; business or financial analysts or business consultants; a lawyer with some kind of financial expertise, and perhaps a mortgage professional.
One desired quality in a finance committee member is that a person be a “big picture person” who thinks outside the box. This individual does not necessarily need to do the work them self, he or she just needs to bring this quality to the table.
Not that long ago, I ran across a building on the Upper East Side that had a wireless tower on their roof. They had a long-term leasing arrangement with a wireless company. Many years after the contract had been signed, someone reviewed the contract and found out that the telephone company had not lived up to their end of the agreement, namely to install a sub-meter and pay for the electricity that the wireless tower was using. The sub-meter had never been installed, thus the building had been paying the electricity that the wireless tower should have paid for. The amount was estimated at $750,000 over 20 years. The lesson here is that someone reviewed an old contract and questioned aspects of the terms.
This is what a good finance committee would have discovered or even prevented, if set up with good controls in place and big picture thinkers that keep their ears and eyes on all projects, big and small alike.