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In The Red

“I can’t believe it,” I knew this wasn’t going to be good news.   “Our Treasurer just told us that the building has been operating in the red for more than three years.  Don’t shareholders have a right to know?”

Sure shareholders have a right to know, but that wasn’t the right question.  How could the board not know, is what I wanted to know.

Do you think if the board of GM or Citibank disclaimed responsibility for the financial screw ups of their corporations they’d get away with it?  OK, bad example, not only did they get away with investing billions of dollars in worthless debt securities, their companies got rewarded with tons of Government bailout largesse.  Buildings aren’t in the category of too big to fail, which is all the more reason why you board ought to  know at a rock bottom minimum whether you have the money to pay your bills and if you don’t where you’re going to get it from.  Maybe our Government can operate with a $1.5 trillion deficit, but then it can print money and your board cannot unless its members are prepared to trade in their pin stripes for jumpsuits.

The Treasurer isn’t the fall guy here.  Sure on paper in most buildings’ bylaws, the Treasurer is responsible for the care and custody of funds. But it’s not like the real corporate world where the Treasurer is a CPA who gets paid for knowing what he’s doing.  The Treasurer in your building could be a podiatrist who knows more about feet than money.  Or just the poor sucker who got stuck in the Treasurer’s seat when the music stopped and no one else wanted to step up to the plate.

 Even if you’re lucky and have a financial wunderkind, that doesn’t absolve the rest of the board. 

 “Don’t you guys prepare a budget?” I asked, because by definition you’d have to know if there were a surplus or deficit from the prior year before you could project how much you’d have to raise maintenance for the upcoming year.

Yes, but –

 “Don’t you guys get financial statements every month that show how much is being spent?”

Yes, but –

“Don’t you provide audited financials to shareholders every year — cause those should show whether the building is operating at a deficit or surplus?” I didn’t want to know the answer.

In some buildings even if boards know the building is operating at a deficit, they don’t raise maintenance for fear they’ll face a revolution among constituents, but they and the building could face a lot worse when eventually they have to pay the piper.

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