Your community association board members have a lot of responsibilities and serve many leadership functions. One of the most important responsibilities the board has is to maintain the financial health and stability of the association, and that falls largely on the board treasurer. Although the entire board makes decisions about budgeting, investments and other money matters, it often falls on the treasurer to analyze and understand financial statements, and explain them to the rest of the board.
Jeff Ellixson is a community association manager for FirstService Residential in Atlanta. “The treasurer should be someone very business-minded, perhaps someone who has owned or led a business previously,” he explained. “The treasurer needs to be able to read a financial statement and understand it. They should be able to understand the financial aspects of an association and what is needed. Someone who can’t balance their own checkbook probably shouldn’t be doing it for their neighbors!”
Besides basic financial knowledge, what else makes a great board treasurer? Read on to find out!
1. Your treasurer keeps an eye on 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.
- Maintaining asset security and proper internal controls
- Retention of financial records.
“The weight of the association’s financial stability falls on all board members,” Ellixson said. “The treasurer is responsible for more of the financial side, but the whole board needs to make sure that a reserve study is done regularly, for example.”
Richard Breske is the director of client relations, client accounting, for FirstService Residential, also in Atlanta. “A good treasurer should be looking at least five years out. I have worked with treasurers that put together a 10 year plan, considering what assessments will be 10 years from now. One of the communities I work with is Windermere, in Cumming. It’s a large master planned community of 1,278 homes built around a championship golf course. We did an analysis of where they are now financially, where they want to be 10 years from now and how they need to handle assessment increases to get there. The treasurer drove that process.”
When it comes to budgeting, the treasurer is key. “For the majority of our associations, FirstService Residential management develops the first draft of the budget, under board direction. Management then turns it over to the treasurer, who edits and notates it and then presents it to the entire board for approval,” Breske said.
2. Your treasurer is able to delegate.
Just keep in mind that, though many functions fall under the treasurer’s purview, it’s not up to him or her to complete those tasks personally. Instead, they will oversee the diligent execution of these responsibilities by the appropriate vendors, such as the association’s CPA, and together they will work to determine how taxes are filed, when annual audits are completed, etc.
In many large communities, the treasurer will set up a finance committee and serve as the chair of it, Breske explained. “So the committee members tackle different tasks, such as budget review, policies and procedures, including invoice review and collecting bids from vendors,” he said. “The treasurer then makes the decision and makes a presentation to the board, based on the efforts of the committee.”
3. The treasurer can educate and explain financials to the rest of the board.
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.
“Often, the treasurer becomes the board’s historian and provides the institutional memory of the association,” Breske said. “I’ve known treasurers who are in the office for four or five years and then become president. They know what’s been budgeted and why, and that is incredibly important to the association’s continuity of operations.”
4. Your treasurer has a 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 financing committee, the accountants and bookkeepers, the bankers, the reserve specialists, the investment advisors and more.
The treasurer is part of the board, and really it’s an all-encompassing behind the scenes role. They may not make a decision single-handedly, but they provide all the facts that go into the decision to the rest of the board.
Breske offered an example of the treasurer’s role: “Let’s look at an active adult community. The captain of the tennis team sits on the board and wants to drive a proposal related to funding for that team. The treasurer should serve as a neutral party, who can do an analysis of the proposal, as well as its affordability. The treasurer will present to the rest of the board on whether or not it can be afforded, so that the board can make a decision on the proposal.”
5. Beyond the big picture, the treasurer focuses on brass tacks.
Make no mistake: the treasurer is integral to the financial stability of your association. At the same time, it’s his or her duty to take charge of the finer points of financial management, including record keeping, insurance maintenance, investments, collections and delinquencies.
What are other personality traits of good board treasurers? Breske had several points:
- They are process-driven. “Let’s say that the tennis courts need to be resurfaced. What is the procedure? The process should be something similar no matter what the issue is: get proposals from vendors, review them, analyze the feasibility and get agreement,” he said. “The treasurer would be driving the process and making sure steps are followed so that a single board member can’t push through an agenda item.”
- They need to be neutral. It’s better to not be affiliated with any of the bigger activities of the community – or recuse themselves from discussion of matters related to that activity.
- They need to maintain confidentiality; they can’t be the rumor mill of the association.
- They can see the big picture and think about that five year plan.
Bad traits would be the opposite of those things, Breske said. He also explained that micromanagement, apathy and a willingness to take shortcuts are less than ideal traits in a board treasurer. An apathetic treasurer not watching investment returns or one who cuts corners on approving invoices can put your entire association at risk of financial instability.
It is essential that all board members are on the same page in their understanding of the roles and responsibilities of the treasurer. An effective treasurer will work with management and the rest of the board to protect your community’s finances. That includes working on the budget, planning investments and analyzing financial statements accurately. A good treasurer is important, but must not dominate or overwhelm the rest of the board. Instead he or she should work with them as a cohesive unit, in the best interests of the community.