Utilizing external resources to ensure sound board business decisions and smooth operations.

Whether you’re a community association property manager or board member, chances are you’ve dealt with at least one difficult board member in your tenure – or in the last month. I wish I could say that this was an uncommon event, but in my personal interaction with boards of directors during audits, tax preparation, and other engagements, it’s fairly common to witness a board member causing some challenges for the rest of the team.

I’ll generally discuss the types of miscreants I’ve met over the years, and then focus on how having a neutral expert like a Certified Public Accountant (CPA) can help keep business and financial discussions and decisions on track.

Understanding, and then dealing with, bad board member behavior

The best board members put their personal opinions aside and focus on what’s best for the community. They treat the HOA or community association like a business, and make smart business decisions. Unfortunately, not everyone is a model board member. Here are a few examples:

  • Axe Grinders. These folks joined the board with a specific purpose in mind, or issue to address. Facts are irrelevant.
  • Debbie Downers. The glass is half-empty for these board members, as they always focus on the negatives – problems, complaints, risks, etc.
  • Perfectionists. This type of board member seeks an unattainable level of perfection, stalling the decision-making process.
  • Bullies. The antagonism can get personal until you concede.
  • Know-it-alls. Whether it’s financial management, politics, or brain surgery, these board member “experts” have an answer for everything. Please read on.

Dealing with a board financial “expert”

We often run into financial “experts” during our various interactions with HOA and community association boards. This includes corporate CFOs, people who served in a financial role at some point in their career, those who slept in a Holiday Inn Express last night (know-nothings), and even an occasional CPA.

Most of these board members really do have some valuable experience that can be applied to their board member role, but only limited financial knowledge specific to community associations. That can cause major problems if decisions are made based on the wrong experience, including:

  • Tax preparation. Community associations utilize different forms and different sets of rules.
  • Reserves. This has a unique meaning to a community, and adequate, timely funding is critical.
  • Insurance coverage. Definitely a financial issue, given the risk to the community and board.
  • Financial reports. There’s no staff to analyze the details, only the board and property manager.
  • Project management. People tend to take on too much themselves, vs. relying on the team.

How a CPA can help

Sometimes, the best way to deal with your board member “expert” is to bring in an expert of your own. For financial, contractual, and risk-related issues, consider utilizing a CPA with community association experience. You’ll have feedback from an authority, as well as relevant examples and other documentation based on the CPA’s experience with other communities.  It’s much tougher to for your “expert” to object to a proposed financial decision when you can say, “I reviewed this with CPA Neal Bach. He agrees, and provided specific examples of similar HOA decisions.” They may not believe you, but they will believe me.

Here are some specific examples (obvious and not so obvious) of where a CPA can provide valuable support:

  • Audits and tax preparation. No surprise here. A CPA is required for an audit, and very few professionals fully understand the nuances of HOA tax returns.
  • Contract review. While an attorney validates the language, a CPA can review the financial terms, comparing with similar vendors.
  • Reporting questions or issues. A CPA can review the books and monthly reports at any time, helping the board understand and present the reports, review variances, and resolve potential issues.
  • Trusted advisor. An industry-experienced CPA can also provide general guidance and opinions as a neutral, 3rd party advisor or mediator.

Experience matters

Make sure you’re working with a CPA that has specific community association industry knowledge and experience, rather than just turning to your personal or business CPA firm. If the firm lacks experience, you’ll pay for that in some way, either through costly research or mistakes. Check out the local CAI chapter website for firms who actively participate as sponsors, speakers, authors, etc.

Neal Bach, CPA