Dive Deeper into Benchmarking Your Cooperative

In my last article on cooperative benchmarking, I made the case that boards would be better informed in their budgeting decisions if they used more and different benchmarking techniques.

Certainly, most boards have used historical data to benchmark future costs. If boards know what the water bill was the past three years, they should be able to reasonably forecast water for the coming year.

Using historical cost assumes the cost is appropriate. It does not provide a competitive comparison but rather looks solely at the property’s history.

Boards can learn quite a lot from comparing similar properties and their operating costs to the cooperative’s own. Comparing water as I did in the last article is a fairly simple process. However, when boards start to think of the totality of all the expenses, the task can be daunting.

Some techniques that lenders and appraisers use to simplify the numbers are helpful. First, these professionals must sort the data and then provide a basis for comparison.

Often, they are provided with statements of revenues and expenses that have significant detail. I recently reviewed a financial statement that tracked the cost of painting under six different line items. The document had a line for cost of painting the exterior, the hallways, the units, the materials, etc. The property provided extensive detail.

To benchmark, lenders and appraisers need to find some commonality, and they do this by reducing all expenses to seven simple cost centers:

  • Administration
  • Management Fee
  • Payroll
  • Maintenance
  • Insurance
  • Taxes
  • Capital Reserves/Capital Expenditures.

Reducing the numerous line items on the operating statement makes the financial information easier to digest and to compare with other properties.

If cooperatives have audited financial statements, you can assume that their CPA has gone through similar steps. Within the audited financial statements, there is a very brief financial statement with few expense categories that were created from the more detailed operating statement the board might review monthly.

It is important to group expenses similarly to the way the industry groups expenses to get the most value and accuracy from the benchmarking. As the categories are broad, it is usually easy to determine where to place each line of detail, but not always.

Health insurance is a good example. A board member could argue to place this expense in either the subgroup payroll or insurance. The industry would tell the board member to put the cost in payroll as the lender or appraiser is trying to understand the total cost of labor, and benefits are a part of that cost. Insurance would be for building, liability and similar insurance.

After reducing the numerous line items into our seven simple cost centers, the lender or appraiser must then find a method to compare the properties to others.

In my last article, I discussed the difficulty of finding good properties with which to compare your cooperative. It is important to find properties of a similar construction design. Limiting yourself to buildings of the same age would make the task very difficult. In many respects, older buildings and newer buildings have similar operating costs. The difference in age is usually seen in capital expenses. Here, the focus is on benchmarking the operating expense.

The method that lenders and appraisers use is to project expenses and then divide the cost by the number of units at the property. By doing so those professionals can measure the operating cost to another property.

If the board were to examine the financial statements and combine the cost of payroll for staff and maintenance people and then divide the sum by the unit count, that would reduce the cost of payroll per unit. If this number works out to $1,500 per unit per year, the board could now gather information on other buildings, obtain their payroll and benefit cost, divide by their number of units and hence have a competitive number by which to view the operating cost.

Boards may wonder how to obtain information like payroll and other data but may be surprised to know they already have the data in hand.

Third-party management companies can also provide the data. They may be unable to give you the actual financials but should be able to speak in terms of per unit per year cost. Regional associations may gather financial statements from their members and publish the data without identifying the actual buildings while still providing enough descriptive information to make comparisons doable.

Benchmarking your cooperative may provide you with better insight into the operations of your property. First, reduce your detailed financial down to seven cost centers. Then divide to learn your per unit per year results. If the property has been recently appraised, the appraisal will contain a section called the “Income Approach” where “comps,” competitive properties to yours, as well as their operating numbers are located, which will help you to find competitive properties for comparison.

This article was featured in CHQ fall 2020 issue. Click here to read the PDF newsletter.

David Wilkins is the managing director of the Walker and Dunlop Detroit offices. He has over 30 years in commercial finance and education.

Three Quick and Easy Steps to Encourage Board Members to Speak Up

Each year you work hard to bring on new board members who will help you do your important work. They’re smart, eager, connected and ready to roll. The excitement is palpable, and they jump in with both feet.

And then something happens. At some point, most board members’ productivity slows down a bit. Like a receding tide, you see them moving away and out of reach. But you still need them. The community is counting on all of you. How can you keep them where the action is, focused on the right things, leveraging their unique gifts?

Several years ago, even as a seasoned executive director, I stopped paying attention to a veteran board member because I just assumed he was still feeling valued and doing meaningful volunteer work. After all, he had been with us for over six years. Then one day I turned around, and he handed me his resignation. I had no idea he had lost interest and was moving on. He hadn’t spoken up, and I wondered why not.

Why Does this Matter?

When you have a shared leadership structure, teamwork is vital to success. And when the team is humming along together:

  • Your meetings run smoother;
  • Your action items actually get completed;
  • You raise more money;
  • You have more ambassadors telling the story of your good work in the community;
  • You serve more people because you’re running more efficiently.

Require Board Members to Speak Up

Yes, you’ve given them an orientation and helped coach them on the ins and outs and culture of the organization when they first joined. But you also might not know what they don’t know that early on. We all realize that open communication generally creates a more positive and productive environment, so set up simple ways of knowing if your board members are doing okay and are still satisfied with their involvement.

Three Quick and Easy Steps to Encourage Board Members to Speak Up:

  1. Enroll a board member or two to serve as champions among their peer circles. Don’t over complicate it. Just ask them to check in with board members who seem to be drifting away. Or maybe seem frustrated about something. Part of your role is leadership development. Not only do you not have to do all the work, but this is a way to involve others who have the influence to help strengthen the team.
  2. Encourage board members to reflect on what matters to them most in regard to their service. Then ask them to speak up and share it so you can support them in achieving it. Maybe they want to be more connected to the mission somehow or they’re motivated by the relationships they’ve made on the board. Once you know, you can be more effective in supporting them.
  3. Have a conversation with individual board members without an agenda. When was the last time that happened? Just ask about their dog, find out when their next vacation is, how that challenge at work is going, etc. This is simple relationship building and sometimes we’re just too darn “busy” to focus on our most precious assets – our people. https://cheapigfollowers.com/buy-instagram-likes/ Time to slow down and chat.

All of us can get distracted or lose motivation from time to time. It’s tough to maintain a high level of participation over long stretches. Ask your board members to tell you what they need – in the beginning, middle and end of their term. And remind them they have a responsibility to share their ideas, questions and concerns. Most of us aren’t mind readers so if you need something, dear board members, please speak up!

Cindi Phallen is a nonprofit strategist and the founder and president of Create Possibility.

Weak Insurance Coverage Could Expose Boards

Purchasing insurance is indeed a complicated endeavor. All policies differ in their terms and conditions, and it is critical that the board spend quality time every year in assessing the cooperative’s coverages and getting the input of qualified advisors.

While many board members believe that the cooperative’s directors and officers liability insurance would cover them if there was a claim for inadequate insurance, this may very well not be the case.

The purpose of this article is to examine common insurance issues found in reviewing cooperative insurance programs and to make some general recommendations to boards on these important issues.

Cooperative Policy Contracts, Not Commodities

Insurance is one of the few industries where the product (i.e. the policy) is almost always purchased sight unseen with the actual policy contracts coming weeks or even months after buying them. This practice is a travesty that has hurt more businesses than can be imagined. Adding to the problem, many business attorneys, including those who specialize in cooperative law, may not have a good handle on insurance coverages and options and may, in fact, shy away from advising you in this area. Yet, when you think about it, one of the most important risk management measures a business can take is to transfer the risk of loss to an insurer so understanding the coverages is critical.

Think about this. How often would an executive enter into a lease agreement without checking with their legal counsel? What about a construction agreement or a purchase agreement? How about a land contract or equipment rental agreement? Most businesses engage their attorneys before signing such contracts. Insurance policies should be treated much the same way, but this is usually not the case.

The insurance buying process is one of the most serious tasks that a board can undertake.

As a board member, you should:

– Read your current cooperative business insurance policies. Get copies for yourself. You always want to be able to say as a board member that you made an attempt at reading these important policy contracts. However, even where policyholders do read their policies, they usually do not understand what they are reading or the options available to address the gaps so recognize that there are technical aspects of the policies that you most likely DO NOT understand. Check with your agent for further direction.

– Recommend the formation of an insurance buying subcommittee that can spend quality time understanding the cooperative’s policies and what is not covered.

– Avoid supporting a process of regular “bidding” of the cooperative’s insurance. Bidding implies that a commodity is being purchased and looks to which vendor has the lowest price. The lowest insurance premiums do not necessarily mean that the coverages are what are needed to properly protect the cooperative.

– Perform due diligence. Interview and hire insurance agents before agreeing to buy insurance from them. Evaluate their proposal based on the expertise and advice being offered. A cooperative is usually not served well by an agent who is a mere order-taker. Ask questions of insurance agents quoting on the insurance, including the following:

• How many cooperatives do you insure?
• Do you represent specific insurance companies that specialize in insuring cooperatives?
• What is the commission your agency would earn on this?
• What other related services do you include such as loss control and claims handling? • How does the cooperative’s current program differ from the one you are proposing? [Note: If the agent has not asked for a copy of the current policies, this is a major “red-flag.”]

– Ask for specimen copies of insurance policies being proposed.

– Consider recommending to the board that it hire an expert consultant or insurance attorney to review proposals and advise you of the price and coverages. Some of the things a good insurance coverage attorney or consultant does include:

• Analysis of cooperative’s insurance policies in relation to how they cover the exposures of the business and what critical gaps exist;
• Review of contracts as to how the exposures presented might or might not be covered by insurance policies;
• Drafting insurance requirements and waiver of subrogation provisions;
• Reviewing and comparing insurance coverage proposals offered by competing insurance agencies and advising the cooperative board on what it is buying; • Interviewing and making recommendations on insurance agencies;
• Working with the cooperative’s existing law firm on coverages. odessa.natashaescort.com

Covered by D & O Policies:

While board members might think that any liability, he or she may have resulting from an insurance decision would be covered by the cooperative’s Directors & Officers (D & O) policy, this may not be the case. Many D & O policies contain an exclusion for decisions related to insurance coverages. If this is the case on your D & O policy, it would place an even greater emphasis on properly managing the insurance process and getting the right advice.

Other Suggestions

A checklist can be used to look for critical coverages.

1] Determine if the property insurance of the cooperative contains a dangerous coinsurance penalty provision that could make the cooperative a “co-insurer” of the loss with the insurer. Ask this question of your insurance agent. If the answer is “yes,” it may be time for a new agent.
2] One of the most common under-insured losses is in the area of having inadequate limits of insurance to replace a building following a fire or other covered cause of loss. How do you know if the selected limit is adequate? Especially in current times with building costs on the rise, this is a more important consideration than ever.
3] If you had to rebuild in a more expensive way to comply with current ordinances or laws, would you be properly covered? Look for what limit of insurance you have.

Sticky Details of Sensitive Employee Terminations Require Boards to be Diligent

As all cooperative boards are challenged with the potential of having a contested termination of a member’s membership and occupancy, there is nothing more challenging than a cooperative having to litigate a contested termination action against one of its employees who is also a member of record. It can be quite common in a cooperative to have a maintenance employee reside in the cooperative. In many cooperatives, the cooperative may have had a janitorial unit built into the original dwelling unit arrangements, or the cooperative may have repurchased a unit to retire it as an apartment unit; and then rent it to the maintenance employee to be on premises. In some instances, the cooperative hires a member to be a maintenance employee, or the employee wants to become a member or is required to do so. It is possible the employee might be a resident site manager. It is also possible that the maintenance or manager person may not be a cooperative employee, but an employee of the management company. Also, in this article, the use of membership also means “share ownership,” and “cooperative interest” is the joint interest of the membership and the right of occupancy. Occupancy agreement also includes “proprietary leases.” The problems discussed herein are the same.

One may think that it is hard to fathom that the beloved maintenance employee, whom you wave and say hello to on a daily basis and willingly let into your home for maintenance purposes, would do anything to jeopardize his or her employment with the cooperative and/or his or her membership and occupancy within the cooperative. However, this dismal situation has been happening all too often at many cooperatives and unfortunately at the expense of the cooperative. In recent years, various cooperatives have had to terminate their maintenance employee’s employment as well as his or her membership and occupancy as a result of embezzlement, fraud, immoral, illegal and criminal activities, self-dealing activities, forgery, timesheet and overtime fraud, material noncompliance with employment duties, drug and alcohol abuse, violations of the rules and regulations of the cooperative’s governing documents as well as other atrocious actions committed against the cooperative at the hands of the maintenance employee. Said cooperatives were successful in terminating the employment as well as the membership and occupancy of the maintenance employee where full termination was warranted. The cooperatives have also been successful in instituting membership probationary measures against maintenance employees whose employment was terminated but was permitted to continue their member- ship and occupancy at the cooperative. The remedy to the complex, sensitive termination of a maintenance employee who is also a member of record is not only for the cooperative to have zealous and tenacious legal representation but to also have a board of directors that will not stand for such immoral and illegal behavior from its employees.

While it may seem beneficial to have a maintenance employee on the premises 24/7, it does not come without difficulties. There are many downsides to having a maintenance employee reside on the complex. There are far fewer downsides to have a non-member employee on the premises than an employee who is also a member. The board has a lot of sensitive details that it must consider if it so chooses to offer a unit to a maintenance employee. Because of the multiple legal and employment complexities involved, it is vital that the Board consult with its attorney during this process.

The first complexity that the cooperative will be faced with is the drafting of the employment and the needed rider to the occupancy agreement, if the employee is a or to become a member. If the employee is a union member and the cooperative is subject to a union agreement or master union agreement, the cooperative has to negotiate the employment contract and/or the terms of occupancy with the union. The cooperative must have an “air tight” employment and, if applicable, occupancy agreement. The employment and occupancy agreement, in the appropriate document, must include, but are not limited to provisions such as job description; hours to be worked per day/week; on call or emergency maintenance protocols; overtime; labor union requirements, if applicable; rules and regulations; insurance; indemnification; alterations/modifications; termination; etc. The attorney can assist the cooperative in drafting these agreements so that the cooperative would not only be fully protected, but to also make sure that the agreement does not violate any employment laws.

The second complexity that the cooperative will without a doubt encounter is how to be sure that a maintenance employee who resides in his/her unit does not abuse the convenience of living on the complex. Trust plays a huge role in this situation. The cooperative does not want a maintenance employee who takes advantage of the convenience by constantly going back and forth to his/her unit during working hours for breaks, lunch, attending to personal/family matters, inviting of guests, working on his or her own personal dwelling unit or violating the rules and regulations of the cooperative. Most importantly, the employee is privy to a lot of sensitive information other members are not and can be prone to engage in politicking with the other members on or off cooperative time in cooperative elections, policy matters or in his own personal interest, like the employee’s differences with management, pay, treatment, etc. The more air tight the employment and occupancy agreement is; the more protection the cooperative has with respect to having a remedy mechanism available to it when the maintenance employee abuses the convenience of living on the complex.

So what happens when the board has determined that the member of record maintenance employee has violated a term of his/ her employment agreement and/or a provision of the cooperative’s governing documents? In this case, the cooperative must not only abide by its respective state’s employment laws and union requirements, if applicable, but it also must abide by its respective state’s laws, statutes and ordinance in recovering possession of the dwelling unit. The cooperative must also abide by the governing documents in terminating the member of record maintenance employee’s membership and occupancy. As the maintenance employee is a member of record who executed an occupancy agreement and has a membership interest in the cooperative, the termination of the membership and the determination of the equity or interest due back to the individual upon move out will be determined by the governing documents.

If a union member, these situations will usually involve grievance procedures with the union where just cause for employment termination needs to be shown. Many attorneys advise clients to always have a due process hearing with respect to the membership termination.

In the event that the cooperative decides to terminate the employment of a member of record maintenance employee but permits the individual to remain as a member, the cooperative must be mindful of potential negative attitudes or treatment that may come its way from the terminated employee. It is vital for the benefit of not only the cooperative and the terminated employee, but also for the membership, that both parties remain cordial. Here you will find a lot of beautiful girls who will show a live sex show or even as it is now customary to say sex broadcast. On our portal free adult webcam – your chance to anonymously meet and chat online with girls without complexes. From Russia and CIS countries around the clock ready to devote time to you and your sexual fantasies privately. The parties must remember that while the employer/employee relationship has been terminated, there is still a cooperative/ member relationship that must continue on a respectful level.

In conclusion, there are multiple legal and employment related complexities that are involved when a cooperative permits a maintenance employee to reside in the complex. As demonstrated, it is vital that the board consults with its attorney with respect to this arrangement. Moreover, the cooperative must be mindful that it is vital that it comply with all state laws and statutes as well as its own governing documents when the cooperative determines that the maintenance employee’s action rises to the level where a termination of his/her employment and/or membership is warranted.

The author acknowledges contributions made by Herbert H. Fisher to this article.

Randall Pentiuk, Esq., is the founding member, attorney and managing shareholder at Pentiuk, Couvreur and Kobilijak, PC. in Wyandotte, Mich.

Ethical Conduct Makes for Good Governance: A Guide for New Cooperative Directors

By Douglas M. Kleine, CAE

Lying, cheating and stealing make good headlines, whether on the front page, the sports page or the business page. Since cooperative members are already aware of illegal activity to avoid, ethical conduct and relationships are appropriate and important to broach on three levels; conduct and relationships in the boardroom and with the executive team; conduct and relationships with cooperative membership and the community; and personal conduct and relationship to self.

In the Boardroom

The board’s primary role is to plan, decide and evaluate. The rules are pretty simple to carry out that role. Be informed. Being informed means more than reading the materials; it also means ascertaining whether the materials you have been provided are sufficient in scope to enable a decision to be made. It means asking clarifying questions and, when faced by technical matters and “experts,” not being intimidated and making sure the expert is a good resource.

Keep an Open Mind
Another rule is to come into the boardroom with an open mind. When power blocs are already lined up, dialog has no chance. New solutions and winwin solutions can come from the understanding created by intelligent discussion and careful understanding of the pros and the cons.

Practice deciding by the three R’s. Reasons-why are we doing this, what is the need and who has asked for it? Risks-what are our chances of success, what is the price of failure, what is the price of inaction? Rewards-what will the benefit be to the cooperative and our members?

Respect Boundaries
Foster the board’s relationship with the manager. The board is only in session for a few hours each month. The manager has to interpret new directions and deadlines and keep routine work running, so be clear in those few hours about priorities, goals and expectations. Be sure there is a meaningful evaluation process for the manager’s performance.

Recognize that the leadership team is more than directors. Staff and the manager are part of the boardroom relationship. Respect boundaries between staff and board functions and realize that for every decision, there is an implementation responsibility that falls to staff.

Do Your Homework
Understand the finances of the cooperative and provide adequate resources to get the job done. Too many cooperatives adopt budgets with arbitrary expense cuts and unrealistic review targets. Too many are far behind in technology, and the technology lag affects so many factorsstaff productivity, customer service and data collection needed for evaluation and decision-making.

Disclose Conflicts
Disclose conflicts of interest. Having conflicts interest is not the issue-everyone has them. The issue is that you and the cooperative recognize and deal appropriately with them when they arise. It is a good idea to have a gift policy, too, so there is clear guidance when to accept gifts from vendors and others, and when the correct response is, “No, thank you.”

Govern All, Not Just One Part
You represent the whole, not the part. If you were elected by one membership sector or geographic area, you can still represent them by bringing their concerns to the board, but having done that, you must then act on behalf of and in the best interest of all the membership.

When You are Among Members in the Community

Some of the most unethical conduct can occur outside of the boardroom. Again, the rules are not that hard to grasp, just difficult to put into practice sometimes.

Resist the Temptation to Intervene or Carry a Cause
One rule is not to speak or act on behalf of the cooperative unless authorized. You are not a 24-hour ombudsman, and you have no authority to intervene in operations, customer transactions and staff intrigue. Learn to ask deflecting questions when members seek your intervention (“Have you asked the manager about this?”) and to be sympathetic within promising something beyond your ability to make happen. Refer inquiries to staff when appropriate.

Respect the Board’s Decision
Occasionally, the board may take an action for which you disagree. The correct public conduct is to support the board’s decision. The damaging conduct is to undermine the board’s decision by citing to the members all the reason why you think the decision was wrong.

Relationship with Self

From time to time, fortunately not often, a board member’s personal life comes into the forefront in a way that brings embarrassment to the cooperative or makes it harder for the board to get a quorum because you cannot get to the meeting. Promise yourself to avoid those situations, and if unavoidable, be quick to step down.

Serving on a cooperative board is a commitment-a commitment to make the time, but even more, a commitment to be engaged with your board members, cooperative members and cooperative issues.

During your service, make room for others by inviting their input, sharing what you know with them and reaching out to under-served or under-represented members. As your service winds down, don’t linger. Let others follow in your footprints and be comfortable in their making some of their own footprints.


Douglas Kleine, CAE, is president of Professional Association Services, providing governance training and consulting to cooperatives and other nonprofts. He was NAHC executive director from 1999-2007. Previously, he served in the Condo and Cooperative Branch of the U.S. Department of Housing and Urban Development.