By Jennifer Olson, CAM / Published August 2019
Every member of a community association’s board of directors has an important role to play. All members of the board have a fiduciary responsibility for the financial health of the association. However, the treasurer has specific duties to protect the association’s assets. These duties—and the authority to exercise them—are found in the association’s governing documents and also in state laws. It’s a big responsibility. If your association has a licensed community association manager or a CPA, they are there to assist with these responsibilities.
Some of the basic responsibilities of a treasurer include maintaining the internal controls; financial records; audits; budget; insurance information; records of assets, including the operating and reserve funds of the association; tax records; and assessment recording.
Internal controls: Treasurers keep an eye on how association funds are being handled. For example, a treasurer would raise a red flag if a check made payable to “Cash” showed up in the association’s books or if the association credit card was used to purchase airline tickets, etc.
Records: Treasurers maintain financial and accounting records—or see to it that they are securely and properly retained, perhaps by the manager. In some instances, community associations work with an accounting firm that may maintain these records as well.
Audits: Association financial and accounting records need to be audited periodically. It is the treasurer’s job to ensure that a CPA undertakes this important activity at regular intervals. The community manager would also assist the treasurer to ensure this is completed in a timely manner.
Budgets: Treasurers are responsible for preparing the annual budget. This doesn’t mean they actually crunch numbers or develop spreadsheets. Rather, they work closely with the community association manager or CPA to ensure the members’ values, preferences, and needs are reflected in the budget. Generally, the budget process is started a few months prior to being presented for final approval. There are several factors to take into consideration when preparing the budget, including the yearly cost increases from the association’s business partners. This is a good time to look into getting new bids from potential business partners or re-negotiating current contracts with the association’s business partners.
Insurance: Treasurers make sure the association has adequate insurance of all types—casualty, fidelity, worker’s compensation, and other necessary protections, including directors and officers policies for the association’s board of directors. Having the proper insurance in place is part of the fiduciary responsibility of the board.
Investments: Treasurers are watchdogs for the association’s investments. They make sure investments are sound and do not jeopardize principal. Boards generally have investment policies that guide their investment decisions, and it’s the treasurer’s job to see that those policies are followed. Be sure to check your association’s bylaws to see if there are any restrictions on where the association may maintain funds. Most investment policies would require association funds to be maintained in FDIC-insured products; some associations go as far as to state in their policies that only banks that have their corporate headquarters in the state of the association are allowed to be used. Investment policies should be reviewed regularly to ensure they are still relevant. Some policies may be antiquated and need to be updated, but any policies currently in place need to be followed.
Assessments: Collecting assessments and monitoring delinquent accounts are typically services provided by the community manager or management company. The treasurer, however, keeps a close eye on the delinquencies and alerts the board to problem areas. If you are dealing with a bank that has a dedicated association banking department, they should be able to provide a report on a daily basis to the manager and/or accounting team of payments received. If the treasurer would like a copy of the daily report, it can usually be provided.
Reserves: Treasurers ensure that the association periodically conducts a reserve study and that reserves are adequately funded in the annual budget. The association’s reserve study should be reviewed to determine if future reserve funding is on track and if the study still accurately reflects the needs of the association. This can be difficult as many unit owners don’t see the use of allowing the association to have adequate funding for their reserves. It is important to remind unit owners that they save funds in their personal financial lives to accommodate for necessary repairs or natural disasters that may occur, and the association should do the same. It could be time to have the study updated if it is more than three to four years old or if the association has completed multiple capital projects since the previous version was completed. A professional reserve study is the roadmap an association should use to reach their long-term funding goals.
Taxes: The treasurer is the board’s liaison to the association’s auditor and CPA. The treasurer monitors the progress of the annual audit and makes sure the appropriate tax returns are filed on time. In addition, the community manager and/or the management company would also ensure that the taxes are handled properly and in a timely fashion.
In short, the association treasurer’s job is to maintain the integrity of the association’s finances. Given the important nature of this responsibility, a treasurer should not try to do everything herself but should rely upon the guidance of a team of professionals to assist with the responsibilities. These professionals should include a community manager, a professional accountant, and a competent association banker. These professionals will be up to date on current laws, and using their breadth of experience, they can help guide the association treasurer to make smart financial decisions.
Jennifer Olson, CAM
Vice President, Centennial Bank
Jennifer Olson is a vice president with the Association Banking group of Centennial Bank. She focuses on the financial goals of community associations in the Palm Beach County area. In addition to being in the banking industry for more than 25 years, Jennifer also holds her CAM license and is President-Elect of the CAI Gold Coast Chapter. For more information, call (561) 209-7166, email email@example.com, or visit www.my100bank.com.