What Does Transparent Mean?
What is the definition of transparent? In its simplest form: see-through or clear. In terms of a business or corporation: one that allows easy access to information and records. In terms of a government (although some may cry “Impossible!”): free from corruption, no hidden agenda, and accountability.
Don’t all the above definitions apply to community associations? An association that practices transparency is one that acts openly, with processes that are easily understood, agendas that are obvious. It provides easy access to information. It is free from corruption, with no hidden agendas. And, there’s a broader application that extends past the communication of information; it’s more about openness. Open meetings, open records (and if you’re at one of those particularly volatile annual meetings, I hope an open bar!). From openness flows accountability, potential reform, and ultimately trust.
Lack of Transparency
Unfortunately, “lack of transparency” is often the phrase leveled at community associations and, by extension, to management companies, for reasons including:
- Failure to allow owners to attend meetings (translation: secret meetings are being held);
- Failure to allow owners to inspect documents (translation: board members are hiding something); and
- Failure to disclose information (translation: board members are covering their tracks).
The word “transparency” is used as a platform to encompass the above claims (which often have no foundation) and a basis for change.
So why aren’t associations more transparent? While there are many reasons, one powerful one is fear. Fear of abusive homeowners, fear of being criticized, fear of sharing bad news, and fear of not knowing all the answers to a particular hot issue. This fear has led many boards to try to find ways to make decisions in private, to refuse to disclose information proactively, to otherwise avoid owner interaction. Ultimately, however, this is not in the best interest of the association.
What Forces Drive us Towards More Transparency?
While many boards struggle with being more transparent, many forces are driving them towards transparency, including the following:
- Economic Environment: Although the economy may have started to shift for the better, money was tight for a fairly long time. There was, and still is, suspicion of how money is being spent and whether it’s being spent wisely in the short term and long term. More financial information is easily one of the most common requests for information today, driving boards to be more proactive in sharing budgetary information and the rationale and authority for big ticket financial items for the upcoming fiscal year.
- Technology: With ongoing advances in technology, people have powerful tools at their fingertips to get the information they need and to spread it quickly. And while technology is certainly useful for rapid information gathering, this leads to quicker scrutiny, often an immediate opinion formed based on that scrutiny, and judgment based on that opinion. This could lead to misinformation being catapulted into, and reinforced by, the cyber world.Being transparent allows associations to have more control over the information that’s dispersed throughout the community. By proactively putting that information out there, you are avoiding the half-truths or misunderstandings that are easily perpetuated through technology.
- Mandated Transparency in Colorado: While the above may indirectly drive boards to be more transparent, don’t forget the many provisions that directly mandate transparency, including:
- The Right to Attend Meetings: C.R.S. §38-33.3-308(2) requires that all meetings of the board, or any committee thereof, be open to attendance by all members of the association or their representatives. The only limitation to the open meeting requirement is the right to go into executive session for those matters that fall within subsection (4) of the foregoing provision.
- The Right to Inspect Records: C.R.S §38-33.3-317 provides that, in addition to the records specifically defined in the association’s declaration or bylaws, certain records must be maintained and produced to the owners for inspection upon request. Also, don’t forget that associations must adopt apolicy on the inspection and copying of records, which should set forth the documents that must be made available for inspection, those that must be withheld, and those which the association has discretion to withhold. The policy should also provide the process by which owners can request to inspect and copy such records.
- The Requirement to Disclose Certain Records Annually: C.R.S. §38-33.3-209.4 requires an association to make certain information available to the owners, on a yearly basis, within 90 days after the end of each fiscal year. This information includes the operating budget, the results of the association’s most recent available financial audit or review, and the minutes of all meetings for the preceding fiscal year, in addition to the rest of the items that must be disclosed.
- The Requirement to Disclose Conflicts of Interest: C.R.S. §38-33.3-209.5(4) requires an association to adopt a conflict of interest policy, under which board members must disclose any conflicts prior to entering into the proposed transaction that created the conflict.
Using Transparency Moving Forward
- Using Transparency as a Shield: Don’t forget that transparency can be a great tool for defense. Perhaps there’s a neighborhood naysayer who is alleging improper decision making, preferential treatment, or some other inappropriate action. Transparency can be used as a shield against these allegations. It drops the cost and the value of the dissent because the truth is already exposed. You have already communicated the rationale and authority for your decision, disclosed the conflict of interest, and informed the owners of the basis for your action.
- Using Transparency as a Sword: In addition, transparency can be used as a tool for holding boards accountable. By providing more and easier access to information, you are creating awareness and a more heightened “checks and balances” system. Transparency could be used as a sword to end inappropriate or corrupt behavior and as a tool for reform.
- Using Transparency to Encourage Collaboration: More transparency can lead to more opportunities to collaborate. You may find that, if you are freer with your information and goals ahead of time and more solicitous of feedback, you will have more collaboration and buy-in. The best ideas and practices might not come from the Board, the manager, the attorney, or whoever else is sitting in a private working session.Be more transparent on the front-end of a project. Be clear on your agenda and desired outcomes. Reveal some of the potential hurdles. Once you’ve done that, you are then free to seek input and find the untapped potential of the homeowners, harness it, and orchestrate a collaborative effort towards the end goal. Don’t miss out on the hidden talent in your community.
While it is clear from the above that being more transparent could lead to more work, let’s hope boards can see through the additional work to the less visible, but very obvious, benefits beyond!