D
spite a myriad of opinions on almost all association ated issues, one thing all members can agree on is the desire to have a recipe for a healthy association. This is no
small task and requires the hard work and collaboration of many parties. Identifying the right ingredients to accomplish this goal is the first step towards achieving it.
The first three ingredients are the most important: Financial Management, Governance, and Maintenance. These ingredients will form the foundation of your “recipe for success.” Many optional ingredients can be added to suit your association’s specific tastes.
FIRST TO THE BOWL, ADD FINANCIAL MANAGEMENT. This much more than simply paying your bills. It begins with the yearly budget, ends with the long-term plan, and includes everything in between. The budget should be developed with all the yearly operating expenses included; this process sets the level of assessments each owner pays. It is important to balance the level of service being provided with the amount of assessments charged. Much like marinating overnight adds to the flavor of a dish; the time spent on the budget is important. A well thought-out budget is the start to a healthy financial year.
Efficient and reliable processes for collecting assessments, delinquency control, paying bills, investing funds, and reporting on the finances are all equally important. Boards need to not only read, but understand, the monthly financials for their association. The board will make many financial decisions throughout the year, and therefore time should be spent each month to fully comprehend the financial health of the association. Confidence by the membership will grow with a focus towards accuracy and transparency on these statements.
Proper financial management will always include a plan for the future. Associations fund reserve accounts for future capital improvements. Without a proper plan, an association can appear healthy, but receive alarming news when proposals for major expenses come in. There is no funding formula that can be universally applied to all associations, which is why a reserve study can be so helpful. This type of study can take an in-depth look at all capital expenses and predict a funding level based on all of the elements’ useful lives and anticipated costs for maintenance and replacement. Commonly these studies project 30 years out, but should be updated regularly. They are a board’s best tool to answer the difficult question of how much money to save.
NEXT, MIX IN SOME GOVERNANCE. This is the implementation of policies and protocols necessary to run your association. Most importantly, these procedures are required to be in accordance with your governing documents and state/local law. A board should be familiar with what laws govern their association and seek out information on them. Additionally,
they should read the Declarations, Bylaws, and Rules and Regulations. Understanding the framework of the association is essential when determining the manner in which it will be governed.
Once the association determines the legal obligations they must work with, many other factors come in to elevate “plain old governance” to “good governance.” These ideas include creating policies which create transparency. A membership that can see the decision-making process clearly will be more understanding, even when differing opinions exist.
Policies should promote participation and be efficient. Boards should do their best to listen to membership when making decisions that will affect the members. While decisions will not make everyone happy, a prescribed method for listening to comments and concerns can aid in making the best decision possible. Associations juggle many issues simultaneously, so efficiency fosters the resolution of these issues.
Boards should be ethical and accountable. They may want to adopt a board member’s oath for each director to agree to, or at a minimum, to understand the shared goals of the board. Directors should act as a group, and not as individuals when holding a dissenting opinion of the majority of the board. Decision-makers hold a responsibility, and should accept the consequences (good and bad) of the decisions they make. They should disclose the outcomes to the membership in a clear and understandable fashion.
Finally, good governance should include monitoring the implementation of these policies and protocols. Monitoring ensures a board is working towards their ultimate goal, which should be to protect and enhance the property and its values.
MAINTENANCE IS THE FINAL ESSENTIAL INGREDIENT TO THIS RECIPE. Properties both big and small require proper maintenance to achieve a healthy status. While this may appear to be an easy ingredient to handle, care and precise measuring is required. The first important step is understanding what exactly the association should be maintaining. Tools, such as a maintenance responsibility chart, can be developed to consult when determining whether an owner or the association should be maintaining a certain element. After understanding the items for which the association is responsible, a board can consider the three main areas of maintenance to begin the plan: corrective maintenance, preventative maintenance and routine maintenance.
Corrective maintenance is reactionary and includes emergencies. Simply said, when something is broken, you fix it. In some cases, these maintenance issues are immediately notable; for example, the hot water goes out, and a vendor will be called in for repairs. Other items may not be so evident. An association should have regular inspections with a focus on looking for items not in proper working order. Proper corrective maintenance will not only help with aesthetics, but often will avoid larger problems.
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