Page 8 - CooperatorNews July 2021

8 COOPERATORNEWS —
JULY 2021
COOPERATORNEWS.COM
alternatively, say there are more payments to
a vendor like an exterminator than expected; pation in reviewing actual costs and seeking ager, and board. If there is a serious concern
we do further investigation. It has a forensic comparable information from other asso-
aspect; perhaps you were misbilled. Or was ciations to see what they are paying and get-
there maybe an extra visit to the property for ting from vendors,” adds Sackstein. “Having they get it right.
some reason? We will verify, correct, and con-
firm, but I can’t tell you if you overpaid until reputation and a wide network of vendors sack-based law firm Phillips Nizer, cautions
our assessment is complete. In the end, the helps as well. When doing a capital project, do boards: “The whole idea behind an audit is to
numbers never lie.”
When working with auditors, Wollman they are reliable.”
says that as a manager, he will provide the
board raw information, vouching for bills,
and examining any written for over a certain
set amount. He will also compile a financial
statement as a budget and comparative tool.
“It must be accurate, thoughtful, and realistic,”
he says.
The pros agree that the best long-term
approach to controlling financial leakage is
vigilance. Management and boards should be
reviewing expenses on at least a monthly or
quarterly basis and coordinating with their
accounting professionals when any unexpect-
ed expenses occur. Zanjirian suggests that a
‘Round Robin’ approach may be best. Audi-
tors should look at different items every year.
Some years energy costs or metered services
should be scrutinized. Other years it might be
supplies or annualized repairs.
After an accounting audit, Wollman
checks against his own projections. “If I did
a good job, it’s close,” he says. “If something is
out of whack, we turn to a specialist.” In addi-
tion to accountants, “there are also profession-
als who can renegotiate your water bills and
other services with the city to get you a reduc-
tion. They are familiar with city programs you
might not be familiar with.” Wollman points
out that this can help—but it does cost money.
“You have to pay for these services.”
Zanjirian also says that while it’s primar-
ily the responsibility of the association or cor-
poration treasurer to review expenses on a
monthly basis and compare them to budgeted
projections, every board member should be
reviewing these numbers themselves, even
if they don’t have a professional background
in finance or accounting. “With new board
members,” he says, “they can call me and I will quire that an audit be done annually—and
walk them through the monthly statements conducted by a certified accounting firm.
and how to view them. More than one pair of
eyes is always better.”
“There should be regular board partici-
a good management company with a good
proper due diligence on vendors to make sure have an outside impartial professional review
Don’t DIY
Unless there are board members who have by the proper outside accounting firm. By not
extensive professional experience in real es-
tate, finance, and accounting, a board should not an audit. Therefore, the board would be
not undertake a full audit of their expenses
on their own, says Zanjirian. When it comes
to association finances, it’s best to hire a spe-
cialist. “Accountants do [audits] and studies.
There are also consultants who do expense
studies specific to your spending. Appropri-
ately qualified managing agents can also do
them. Much stems from how good the man-
agement company is. The best run buildings
have good, involved board members and
great managers, but you should still seek pro-
fessional advice.”
Wollman also warns against homespun
audits, and points out that most bylaws re-
Sackstein says that the financial auditing or
review process should be a collaborative effort
between the association’s accountant, man-
about fraud, she recommends hiring a pro-
fessional team to examine forensics to ensure
Scott Piekarsky, a partner at the Hacken-
and test the books and records. It’s the highest
level of accounting review, and must be done
doing that, anything else quite frankly is just
shirking their fiduciary duty and responsibil-
ity. They could be compelled to do so if one
filed suit.”
In the final analysis, vigilance is the key
to maintaining the financial health of your
co-op or condominium community. That
vigilance requires a team and a plan. That
team includes accountants, auditors, man-
agers, cost specialists, and board members.
Reliable projections of expenses and regular
monitoring of those projections against real
expenditures are crucial to catching any fi-
nancial leakage. In the long run, vigilance
is more effective than wishful thinking. In
business—and that’s what your community
is—unexpected bumps in expenses are usu-
ally the result of poor monitoring, not one-
time blips on the economic horizon.
n
AJ Sidransky is a staff writer/reporter for Co-
operatorNews, and a published novelist.
“You generally
get what you pay
for—especially with
professional services—
so don’t try to save
a few dollars on
an attorney or an
accountant and expect
top shelf service.”
—Avi Zanjirian
tablishment of HDFC co-ops.
The Mitchell-Lama program, named for
the two New York State legislators who cre-
ated it, brought a level of housing integration
and stabilization to New York City neighbor-
hoods. It stemmed the exit of white, middle-
class residents from New York City for home
ownership in the suburbs by offering middle-
income renters the option of ownership in
newly built, income-restricted co-op build-
MIXED INCOME...
continued from page 1
ings. By contrast, HDFC co-ops were most
often established in existing rental buildings
that had been abandoned by their owners to
the City. They provided a similar opportu-
nity for in-place residents to own their apart-
ments under income caps similar to those of
Mitchell-Lama buildings. HDFC provided
home ownership opportunities to lower- and
middle-income New Yorkers who might oth-
erwise never have had such opportunity.
“Morningside Gardens in Harlem, and
Mitchell-Lama throughout the city, are excel-
lent examples of what government can do to
provide middle-class housing in a way that re-
sults in asset creation for middle-class people,”
says David Eisenbach, a historian and lecturer
in history at Columbia University. “Mitchell-
Lama was signed into law in 1955. It created
middle-income housing, both rental and co-
op. The biggest landmark project under the
program was Morningside Gardens north of
Columbia University. With green space, and a
very diverse population both racially and eco-
nomically, it is a great success. The genius was
to create these opportunities for people who
were ‘hardcore’ New Yorkers. People were
fleeing New York City, but these people want-
ed to stay—so this program also helped keep a
tax base in New York City. The buildings were
state-of-the-art, with fresh air, green space,
and shopping. Each apartment had a terrace,
etc. The building loans were backed through
the tax system. It was an imitation of the ear-
lier Federal Housing Act dating from the New
Deal. The basic premise was to keep middle-
class people in New York City to maintain the
tax base to help build more.”
According to Eisenbach, Mitchell-Lama
was a tremendous success—“perhaps the
most successful project of its type in history.
It provided not only housing for the middle
class that was fleeing the city, but an asset—a
co-op—as well. Now these people have an as-
set, and it accrues value. But the buildings had
restricted sale rules to keep it middle income.”
Robert Snyder is an author, retired Rutgers
University professor, and the current Histo-
rian for the Borough of Manhattan. He ob-
serves similar positive economic integration
deriving from the HDFC home ownership
program that’s been popular for some five de-
cades in New York City. “HDFC co-ops are a
great example of how we can provide mixed,
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