The board members of your community association serve many important leadership functions. Although they may have diverse backgrounds and skill sets, they are all committed to the common goal of bettering your community association, taking actions that ensure its financial health, enhancing property values and improving the lifestyles of the residents.
Patricia Butler is the director of client accounting relations, and has worked for FirstService Residential for 20 years. She said that a good treasurer is involved with managing the finances of a community. “They don’t just sit back and let it happen,” Butler explained. “They help make sure that assets are invested wisely and take other specific actions to fulfill their fiduciary responsibility to the community.”
What can happen if you don’t have an effective board treasurer? Although the entire board shares a fiduciary responsibility to the community, most boards look to the treasurer for leadership on financial matters. A treasurer who isn’t interested in, or doesn’t understand, the community’s financial statements and budget, can unintentionally cause financial chaos for your association.
“Many treasurers have some background in finance, business or accounting, but not always. If the treasurer doesn’t understand financials and doesn’t want to admit it, they may not ask the right questions. At the end of the year, if the expenses are over budget, they may not understand why they have a loss.” Butler said. “We can offer and try to educate people, but sometimes someone may become treasurer almost by accident, and simply isn’t interested in the details. We hope, in those cases, that another board member has the background to understand the financials.”
Read on and learn more about how essential the treasurer is to the future of your association.
1. Your treasurer has a distinct voice – and knows when to use it.
Boards are made up of different people, all with different priorities. Maybe it’s safety. Maybe it’s quality of life. Maybe it’s compliance. But for your treasurer, the main priority is financial health. This person must always be the voice for financial stability in your association. As such, he or she will function as the liaison to the auditor, the manager or management company, the finance committee, the accountants and bookkeepers, the bankers, the reserve specialists, the investment advisors and more.
“I’ve seen the treasurer step up and actually take control of, not just financials, but everything. I’ve also seen treasurers who sit meekly in the corner and say nothing. Sometimes a treasurer will take control because of a lack of leadership by the president, and sometimes it’s just that the treasurer is a very forceful personality,” Butler said. “Sometimes there’s a treasurer who is just so competent that the other board members step back and let that treasurer take control of the show. A balance is critical. You want a treasurer who is confident and capable but doesn’t walk all over the rest of the board.”
2. Your treasurer is invested in your association’s long-term financial health.
Though your treasurer may serve a variety of functions, his or her primary duties will include:
- Development and ongoing review of the annual operating budget
- Overseeing the association’s reserve funding plan
- Investment of the association’s funds and collection of assessments
- Ensuring that assets are secure and proper internal controls are in place
- Retaining the association’s financial records
The treasurer needs to be advancing the vision of the community and operate in alignment to it. Long-term financial health isn’t just about this year’s budget; it also includes making sure that the reserves are properly funded to take care of repairs in three years.
3. The treasurer knows how to explain financial information to others.
Board members and association members may not have a clear understanding of the role that reserve funds play in the future of the community. Sometimes, treasurers are the only members who truly understand that these funds are set aside for future capital expenditures, not alternate operating funds or contingencies. It’s up to the treasurer to educate the board and membership as to the proper use of these funds and apply them appropriately.
“Lots of treasurers are great educators! They explain what’s happening, whether it’s an issue around delinquent accounts or the overages of the budget, and that’s very helpful. Other members of the board may not have any financial background and a treasurer who can explain things to them is valuable,” Butler explained.
Butler said she’s also seen treasurers, rarely, who don’t want to share information with the rest of the board. They want to micromanage the community, especially when it comes to financial issues. “Board members are equal partners,” she said, “and when a board treasurer won’t share his or her knowledge, it’s detrimental to the rest of the board.”
4. The treasurer should be detail-oriented… to a point.
Make no mistake: the treasurer is integral to the ongoing financial health of the association. At the same time, it’s his or her duty to take charge of overseeing the finer points of financial management, including record keeping, insurance maintenance, investments, collections and delinquencies. Of course, a professional property management team can be a great asset and resource with all of those tasks.
“There is a difference between being detail-oriented and micromanaging,” Butler noted. “The treasurer should make sure that the vendor is being paid, but shouldn’t follow them around the property and check on every facet of the job before doing so. I’ve seen treasurers who want to sign every check, approve every invoice and follow up on every vendor’s job before paying them. If you have management that you trust, it’s not necessary.”
5. Your treasurer should know when to delegate.
Although the treasurer’s job includes many different functions, it’s not that person’s job to complete all of those tasks personally. The best treasurers trust their property managers and work with them to delegate financial responsibilities to auditors, tax preparation professionals, investment advisors and insurance brokers. “Communication is key between the board, the property manager, and often the accounting department, especially in all facets related to finances,” Butler said.
Your community association board treasurer has one of the most important roles in your community. The best treasurers are able to communicate clearly, with both the property management team and fellow board members, maintaining transparency at all times. Knowing when and how to delegate, while remaining fully informed, is also key to being an effective treasurer. Being dedicated to your community and its long-term stability is the most important trait of all!