Last, but certainly not least in our blog series exploring the roles of Association officers, we discuss the role of the Treasurer. Like the Association Secretary, the Treasurer may delegate many of the tasks for which he or she is responsible to the association’s managing agent; however, the Treasurer is ultimately responsible for ensuring that all of these tasks are performed properly. In light of this responsibility, the Treasurer should be familiar with the critical areas of financial responsibility.
If an association employs a professional management company, the Treasurer should receive a package of financial material before each board meeting. That financial package should include a balance sheet, statement of income, bank reconciliations, schedule of accounts payable, cash receipt and disbursements activity, homeowner delinquency report, and general ledger or journal entry activity. If self-managed, the Treasurer may personally prepare these items or may use the assistance of a bookkeeper to do so. The Treasurer should give a presentation of the association’s financial position at each board meeting.
The Treasurer should monitor homeowner delinquencies and ensure the association’s attorneys and agents are pursuing the collection of delinquent balances in accordance with a collection policy established by the board.
The Treasurer’s major responsibility is to prepare the association’s annual operating budget. The budget process should begin as far in advance of the end of the fiscal year as possible. Prior year budgets serve as the historical basis for the current years’ budget. Delinquent assessment receivables should be analyzed to develop a realistic bad debt account and costs to collect delinquent amounts should be included in the budget. The Treasurer should inform the board when the budget and annual assessment are inadequate, regardless of the personal burden that may be created, and the Treasurer should recommend solutions, including assessment increases or special assessments when necessary.
As part of budget preparation, the Treasurer also should implement a replacement reserve budget and program, based on a long term capital reserve study, and ensure that funding is adequate. To establish a replacement reserve program, major capital assets must be inventoried to establish the remaining useful service life of those assets and their replacement cost. Typically, professionals such as consulting engineers are employed to assist in this process by preparing a “capital reserve study”. Once the study is in place, it should be funded annually through portions of the annual assessment and updated periodically. The association should update its reserve schedule every three to five years.
The Treasurer also must ensure that state and federal income tax returns are filed on a timely basis. The Treasurer should consult with the association’s tax advisor regarding the annual election it must make for filing its federal and state tax return and the method chosen for filing income taxes.
The Treasurer is responsible for the timely payment of real property taxes if an association owns common areas or other property. While few condominiums own real property, many homeowner and property owner associations do. The Treasurer should ensure that a tax bill is being received for all real property owned. Further, the treasurer should review the amount of the tax bill confirming the property is being taxed at a nominal amount. Common area should be afforded special tax treatment and taxed at a nominal rate since it is reserved for the exclusive use and enjoyment of owners. If common area is not being taxed at a nominal rate, the association’s attorney should be contacted for counsel on the issue.
The Treasurer acts as the board’s liaison to the CPA for any audit of the association’s accounts. While not all association documents require annual audits, an audit should be conducted periodically regardless of the size of the association, particularly when there is any change in association management, any substantial change in the composition of the board, or upon developer turnover. An audit provides independent assurance that the association’s finances are in order.
As you can see, the Treasurer plays an integral role in the financial success of the community. The hard work of a dedicated community association Treasurer can make all the difference in making sure that the association’s goals and objectives are met.