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  • Define Policy: A program of action or a set of principles according to which the cooperative ’s business will be conducted. Does the policy meet the need? Violate members rights? Understandable? Compliant with Fair Housing?
  • Management Reports
  • Transcript

    • 1. New Board Member Training Alicia Osborne & Mary Thomas
    • 2. Cooperative & Its Principles
    • 3. Cooperative IDENTITY Statement
      • “ An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.”
    • 4. Cooperative VALUE Statement
      • “ Self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.”
    • 5. Rochdale Principles
      • All Cooperatives share a common set of principles adopted by the International Cooperative Alliance
      • The Rochdale Principles originated in 1844 in Rochdale, England by a group of weavers who opened a co-op store; this is considered the birthplace of modern cooperatives
      • These principles guide cooperative business today
    • 6. 1 ST Rochdale Principle
      • Voluntary & Open Membership
      • Voluntary organizations open to all
      • To become a Member, one must make an informed decision based on accurate information
      • Cooperative operations are transparent to all Members
    • 7. 2 nd Rochdale Principle
      • Democratic Member Control
      • Democratic organizations controlled by their Members
      • Voting rights – One Member = One Vote
      • Proxy Voting – restrictions that make it near impossible for an individual or small group to gain control
    • 8. 3 rd Rochdale Principle
      • Member Economic Participation
      • Members contribute equally to and democratically control the Cooperative ’s revenue
      • Member ’s contractual obligation and responsibility to timely remit the monthly carrying charges
      • Member ’s responsibility to properly use Cooperative resources
    • 9. 4 th Rochdale Principle
      • Autonomy & Independence
      • Self-help organizations required to provide their own governance and accountability
      • Volunteerism – Board of Directors
      • Volunteerism – Committees
      • Pride in Ownership – tasks or services that would otherwise cost the Cooperative, performed by volunteerism
    • 10. 5 th Rochdale Principle
      • Education, Training & Information
      • Providing education and training is an obligation
      • Good sales information, newsletters, open membership meetings, internet, orientation
    • 11. 6 th Rochdale Principle
      • Cooperation Amongst Cooperatives
      • Organizations such as the National Cooperative Business Association are formed to represent Cooperative interests before Congress and federal agencies
      • NAHC represents housing cooperatives
    • 12. 7 th Rochdale Principle
      • Concern for Community
      • Sustainable development of their communities
      • Policies approved by the Members
      • The cooperative mandate stems from its Members
    • 13. Cooperative Firsts
      • New York – 1876; the Randolph
      • First Known Litigation – 1886; Barrington Apartment Assoc.
      • First outside of New York – 1909 in Chicago
    • 14. Cooperative Foundation Stockholders
      • The cooperative corporation is owned by it ’s Members or Stockholders
      • This is the highest level of accountability
    • 15. Cooperative Foundation Board of Directors
      • The Cooperative Corporation is governed by a Board of Directors
      • They have a duty to govern ethically
      • They are elected by and are responsible to the Stockholders
    • 16. Cooperative Foundation Management Agent
      • The Management Agent manages the assets, including enforcing policies & procedures
      • Provides oversight for the day-to-day operations
    • 17. Cooperative Foundation Debt & Equity
      • Cooperatives operate with revenue generated from carrying charges and other miscellaneous items (i.e. interest income)
      • The Stockholders are the owners and consumers
    • 18. The Cooperative Difference
      • Owners have collective Democratic Control
      • Members are both the owner of their resources & the consumer of their resources
      • Liability Protection – The corporation protects individual shareholders from the cooperative ’s debt
      • Tax Benefits – Owners have tax benefits similar to that of homeowners
    • 19. Types of Cooperatives
      • Limited Equity
        • A corporation whose deed or By-Laws places restrictions on equity growth and accrual in exchange for a form of subsidy or an insured mortgage
        • Limits on maximum resale price & limits on prospective Members income
      • Market Rate
        • The opposite of the Limited Equity Cooperative
        • No restrictions placed on equity growth and accrual
        • No restrictions or ceilings placed on prospective Members income
    • 20. Types of Cooperatives
      • BMIR – Below Market Interest Rate
        • A cooperative insured under the Section 221 (d)(3) program providing market interest rate financing in the form of lower interest rates.
        • HUD pays difference between going rate and 3%
      • 236 Cooperative
        • Program replaced the BMIR in 1968; HUD insured the interest rate subsidy on the outstanding mortgage resulting in an interest rate to the Cooperative of 1%
    • 21. Types of Cooperatives
      • 202 Cooperatives
        • Developed for exclusive use by the elderly and directly financed by HUD
      • Section 8 Cooperatives
        • Started in cooperatives when the existing mortgage was suffering and deeper subsidies were needed
    • 22. Legal Cooperative Types
      • NOT FOR PROFIT
      • Has a Board of Directors and is formed for its Members only. It is a business not a charity and in most cases are not tax exempt
      • NONPROFIT
      • Has a Board of Directors, no shareholders, no profit, but officers and management may be paid reasonable salaries for services
      • It is tax exempt
    • 23. Cooperative Documents
    • 24. Articles of Incorporation
      • Constitute the legal document that establishes the cooperative as a business organization subject to laws of the state in which it is chartered. They state the name under which the Co-op will operate and the purpose of the Corporation: to provide housing to its Members on a non for profit basis.
    • 25. Subscription Agreement
      • Documents the purchase of shares in the housing cooperative. It includes a record of the number of shares purchased, the value of the shares and the related monthly charges.
    • 26. By-Laws
      • Written rules and regulations governing the operation of the co-op. They deal with Membership, meetings of members, the board of directors, officers of the corporation, rights of the regulatory agency, how by-laws shall be amended, and fiscal management of the Cooperative.
    • 27. Regulatory Agreement
      • Federally insured co-ops agreement with HUD or FHA. Its stipulations require the co-op to:
        • Make payments due under the terms of the Mortgage
        • Establish and maintain a General Operating Reserve
        • Collect adequate housing charges not to exceed a HUD approved schedule
        • Limit Co-op Membership to low-to-middle income families
        • Certify Members ’ family income annually
    • 28. Mortgage Agreement
      • Legal Document between Cooperative and the Financing Agency that provides the mortgage, usually a bank.
          • Conventional
          • FHA
      • Usually has guidelines that need to be followed for Reserve and Escrow requirements, management, audit, property inspections, insurance, etc…
    • 29. Occupancy Agreement
      • The contract between each member and the corporation, which gives the member the right to occupy a unit, participate in the governance of the cooperative and receive tax benefits.
    • 30. Membership Certificate
      • Legal Document between Co-op and Member giving them their share in the cooperative.
    • 31. Use Agreement
      • Properties that pre-pay their HUD mortgage
      • Takes the place of the regulatory agreeement
      • Usually for the remaining term of the original mortgage
      • Less Restrictive than Regulatory Agreement
    • 32. Management Agreement
      • Agreement between the Cooperative and the Management Agent
      • Outlines the guidelines of management, term, pay, spending authority, employees, etc..
    • 33. Financial Responsibilities
    • 34. Roles & Responsibilities - Board
      • The Board of Directors is responsible for the financial solvency of the cooperative.
      • They interview and hire a management company
      • Membership Selection
      • Governing body of the cooperative, they set all policies and procedures
      • To keep the membership informed
    • 35. Roles & Responsibilities-Management
      • Accountable to the Board, defining operating objectives, goals and policies within constraints defined by Board
      • Participates in long range planning
      • Decides how objectives will be achieved
      • Prepares budgets, and marketing plans for Board approval
      • Implements procedures to obtain goals and objectives
      • Monitors, reports and recommends member benefits
      • Develops job descriptions, performance standards, and compensation benefits for staff
      • Provide required financial monthly reports
    • 36. Roles & Responsibilities - Membership
      • Follow Policies & Procedures
      • Participate in Committees
      • Attend open board meetings
      • Vote or Run for Board of Directors at Annual Membership Meeting
      • Help keep operating costs low
    • 37. Operating Budget
      • The annual budget is the financial roadmap the cooperative needs to follow during its fiscal year.
    • 38. Operating Budget - Timing
      • Fiscal Year is your financial year according to the IRS
        • Calendar – Jan thru Dec
        • Other 12 month period
      • Preparation should start 120-Days prior to fiscal year end
    • 39. Operating Budget - Preparation
      • Budget is prepared by the management agent
      • Reviewed by the Budget Committee & Board of Directors
      • Approved by the Board of Directors
    • 40. Operating Budget – YTD vs. Projected
      • When preparing the budget management will compare what you spent last year (audit) to your Year to Date figures this year (annualized) to come up with projected numbers for your new fiscal year
      • Step 1: Previous FY Figures
      • Step 2: Actual To Date Figures
      • Step 3: Projected Revenue & Expenses
      • Begin with expenses and upon completion of expenses determine the revenue needed to meet expenses
    • 41. Monthly Financial Report
      • Report Prepared by Management Agent Should Include the Following:
        • Accounts Receivable
        • Accounts Payable
        • Occupancy Rates/ Vacancy Loss
        • Budget Comparison
        • Disbursement Register
        • Schedule of Reserves
    • 42. Monthly Financial Reporting -Accounts Receivable
      • Collection Rate=
        • Actual Rent Collected/Gross Potential – Vacancy Loss in Dollars
      • Industry standard or “healthy property” is usually 95% by the due date
      • If carrying charges are not paid on time are people being turned over to your attorney within the same month for collection?
      • Collection Policy – does it support good asset management? Does it need revisited?
      • RED Flag = Members owing > one month of carrying charges or collections consistently below 95%.
    • 43. Monthly Financial Reporting -Accounts Payable
      • Money that you owe to your vendors and suppliers each month for services and supplies
      • Do you have outstanding payables at the end of each month?
      • RED Flag = Payables older than 30 days
    • 44. Occupancy Rates
      • How many of your units are occupied each month?
      • Occupancy Rate = Number of Occupied Units / Total Number of Units
        • For example, 328 units occupied / 340 totals units = 96% Occupied
      • Nationwide the current trend is 92%
      • RED Flag = Occupancy Rate < 90%
      • Vacancy Loss if applicable can never be recovered .
    • 45. Monthly Financial Reporting -Budget Comparison
      • Compares your monthly expense and income budget to your actual monthly amounts
      • Actual Monthly Revenue – Actual Monthly Expenses = Is it positive or negative?
      • Management should provide a variance report to explain variances from the budget amount
      • Important tool for preparing the next annual budget……
    • 46. Monthly Financial Reporting – Check/ Disbursement Register
      • A check register listing who was paid, check number, amount and date of payment
      • Should have memo ’s notating units or descriptions
    • 47. Monthly Financial Reporting – Schedule of Reserves/ Investments
      • List of investment accounts that the cooperative maintains at various banks/ institutions
        • Held by Cooperative
        • Held by Mortgage Company
      • Cash Accounts
      • Membership
      • General Operating Reserve – Savings
      • Replacement Reserve
      • Real Estate Tax Escrow
      • Insurance Escrow
      • Rehab Escrow
    • 48. Cash Accounts & Membership
      • Checking account that all of your revenue gets banked into each month
      • It is used to pay all of your expenses each month.
      • You should be depositing enough each month to cover all of your expenses
      • Membership Account – Account that the membership & equity payments gets deposited and disbursed from
      • Both are Property Held
    • 49. General Operating Reserve
      • Savings account required by HUD held Mortgages
        • requirements listed in Regulatory Agreement
        • Usually 15% of your Gross Potential in savings
        • Need to fund 3% of your Gross Potential each year
      • Funding of the GOR at a given percentage drops and is eliminated when it reaches the level specified in the regulatory agreement
      • Cannot withdraw more than 20% of balance of GOR (fiscal year beginning balance) without prior HUD approval.
      • Held by Property
    • 50. Replacement Reserve Account
      • Funded at a regular monthly rate for the life of the mortgage for capital improvements as needed.
      • HUD held and need HUD ’s approval to withdrawal
      • After HUD mortgage is paid off funds are given back to the property for their control
    • 51. Real Estate Taxes Escrow
      • Money used to pay your Real Estate Taxes
      • Held by mortgage company -usually required by your mortgage agreement
      • Should be funding each month so that there is enough to pay your real estate taxes when they are due.
    • 52. Insurance Escrow
      • Money used to pay your Property & Liability Insurance
      • Held by mortgage company -usually required by your mortgage agreement
      • Should be funding each month so that there is enough to pay your property insurance when it is due
      • Mortgage company stipulates the amount of insurance coverage your property should keep
    • 53. Tips/ Pointers for Reading the Financial Report
      • Ask for the report prior to the Board meeting, suggested at least 3 (three) days prior
      • Review the report prior to the meeting and have questions ready to ask
      • Allocate time for management to review the financials during the Board meeting
      • Be sure to follow-up if an answer cannot be provided to your question during the meeting
    • 54. Fiscal Year Audit – Content
      • Summary of annual income and finances as audited by an independent third party
      • Usually required by HUD and your Mortgage Company
      • They are auditing to make sure checks and balances are in place and to give an overall snapshot of the financial well-being of the cooperative
    • 55. Fiscal Year Audit – Reviewing
      • Review for Negative Findings Such As:
        • Overage on GOR Withdrawals w/out HUD Permission (20%)
        • Open Findings From Previous Year
        • Overage in a Particular Budget Account Item ex: Conference Expenses
        • Failed REAC Scores
        • Unresolved MOR findings
      • RED Flag = Any Negative Findings
      • Review & Analyze Expense Trends
    • 56. Fiscal Year Audit – Bidding
      • Auditors are chose by a competitive bid process each year
      • Usually good to have the same auditor for multiple years
    • 57. Reserve Analysis & Long Term Planning - What
      • Reserves or Investments are the cash that you have saved to replace your equipment and property as it ages
    • 58. Reserve Analysis & Long Term Planning - Why
      • Needed to ensure that your property is properly maintained as it ages to preserve your property value and to remain marketable
    • 59. Reserve Analysis & Long Term Planning - How
      • Look at reserve balances each year
      • Prepare an estimate of needs – “how much do you plan to withdraw this year”
      • Make sure you are funding at an amount that will cover your needs and continue to increase your reserve balances
      • Reserve Analysis can be done for 5, 10 or 20 years
      • Needs to be updated annually to adjust for any changes and unexpected expenses
    • 60. Effective Leadership
    • 61. Listening
      • Do not interrupt
      • Do not judge
      • Face the speaker
      • Watch all non-verbal behavior including your own
      • Concentrate on what is being said and not rehearsing a response
    • 62. Communication Skills
      • The best communicator is a good listener
      • You must consider the personalities and biases of every Member of the Board
      • Always remain calm, speak in a normal, but firm tone if faced with confrontation during a Meeting
      • Remember that each Board Member has an opinion but the Board speaks to the community and to Management in ONE voice
    • 63. Team Building
      • Identify the Problem
      • Identify the source or sources of the Problem
      • Identify a solution or solutions
      • ACTION!
    • 64. Parliamentary Procedures
      • These procedures are important as they entitle everyone to share their position and allows the Board to make informed decisions without confusion.
      • Always have an Agenda for your meeting
      • Do not move on to another topic without concluding the prior one
      • Motions are made, seconded, and then can be discussed prior to a final vote
    • 65. Ethics
      • All Board Members must practice their responsibilities ethically
      • Ethics is the point where morality meets law
      • Morals are personal beliefs
    • 66. Cooperative Operations
    • 67. Eligibility
      • Membership Selection Plan – Each cooperative should have a written membership selection plan.
      • Membership Committee
      • Membership Orientation
    • 68. Policies & Procedures
      • The board makes, approves, and implements the rules of the cooperative.
      • Rules need to be for the good of the entire membership, not to accommodate a few members
    • 69. Maintenance Program
      • The board needs to make sure through their management agent or employees that a maintenance program is implemented. This includes:
        • Work Order Policy
        • Emergency Policy
        • Annual Inspections
        • Preventative Maintenance Program
    • 70. Governance, Enforcement & Implementation
      • Defining goals and standards and ensuring effective structures and procedures to enable the Cooperative to achieve those goals
      • Creating policies used to administer the day-to-day operations
    • 71. Oversight Duties
      • Responsibility to ensure that the created standards are being followed and that Cooperative affairs are properly administered
    • 72. The Ideal Board Should…
      • Do its homework
      • Be informed
      • Be supportive of Management
      • Maintain a sense of balance between needs of members and staff
      • Be aligned, work in the same direction
      • Exhibit trust and maturity
      • Be full of energy and ideas
      • Be honest and consistent
      • Develop a method for discussing internal governance and accountability
    • 73. The Directors ’ Golden Rule
      • Running a housing cooperative is a serious business. It is not an opportunity to play games, to reward friends, to punish enemies, to push petty personal projects, or to accumulate power.
    • 74.
      • www.ekirkpatrick.com

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