The Role of the Treasurer Forum Session

With Huge Thanks to Cathy Kuhn from the CPA firm Cagianut & Company, this session covered this role in extensive detail.


Cathy's session proved informative and entertaining, and she's supplied links to her session handouts. 


As well, their Web site is rich with details for treasurers and others involved in the financial business of common interest communities. Their topics cover taxes, reserves, critical issues and more.

Comprehensive Tasks: The Role of The President/ Vice President

The Role of the President

Community association presidents are required to fulfill many roles, but the primary roles are leader and manager. Different situations will determine which role the association president assumes. Sometimes the president must set aside other roles, such as neighbor or friend, to accomplish a task or make a decision.

Association presidents gain their authority to lead a community association from state law -- generally called the Common Interest Ownership Act. The president should have a basic understanding of the law pertaining to community associations, as well as the association’s governing documents—the declaration (also called Covenants, Conditions, and Restrictions—CC&Rs), bylaws (which address the association’s structure, the board, the officers, definition of a quorum, ability to enter into contracts, etc.), and the rules and regulations (the operational and behavioral laws that apply to association residents). Therefore, presidents must perceive the association as both a community and a business, as well as operate on the democratic principles of government.

T H E   R O L E   O F   T H E   P R E S I D E N T  TO  OV E R S E E   O P E R AT I O N S

Association presidents must adhere to budgets, formulate and enforce rules and policies, conduct meetings, prepare agendas, and work with committees.

S P E A K   F O R   T H E   B O A R D   A N D   A S S O C I AT I O N

The president is the official spokesperson for the board -- to association members, the community manager (or management company), vendors, the press, and the greater community.

S E E K   K N O W L E D G E

Learning how to be president of a community association generally comes from on-the-job training. However, educational resources for association volunteers are available in books, seminars, periodicals, and networking offered by groups that serve common-interest communities, such as Community Associations Institute and its chapters.

W O R K   W I T H   V O L U N T E E R S

The president is the leader of the board, a body that typically includes:

** The vice president -- who substitutes for the president in his or her absence

** The secretary -- the official recorder of the association’s activities 

** The treasurer -- the chief financial officer of the association 

It’s in the president’s best interest to encourage the officers’ participation in association affairs and to develop their skills as team members. The president should also attempt to identify and train potential association leaders, encourage them to join the board, and orient them to their new responsibilities. 

T H E   R O L E   O F   T H E   P R E S I D E N T  T O  W O R K   W I T H   P R O F E S S I O N A L S

Many associations employ either a community management company or a professional manager who directs association operations based on policy set by the board. The president is theliaison between the manager and the association. Seeking the services of an attorney, architect, or insurance professional is in the best interests of the association. Experts provide information and expertise that board members don’t normally have. For example:

** Reviewing legal contracts requires advice from an attorney.

** Managing reserve funds requires guidance from an accountant or investment advisor.

P R O T E C T   T H E   A S S E T S

Board members (and, in particular, the president and treasurer) have a fiduciary obligation to protect the community association by:

** Preparing and adhering to an association budget (with the assistance of the professional manager) that reflects the values and wishes of the members. 

** Adequately funding reserve accounts and educating homeowners about the value and purpose of a reserve fund.

** Collecting fees from homeowners.

** Seeking the advice of a certified insurance specialist and protecting the association with appropriate levels of insurance coverage.

The position of association president is not for everyone, but fortunately every president has a board from which he or she can draw support. As long as the members recognize theimportance of the community that unifies them, the role of president can be very satisfying.!

T H E   R O L E   O F   T H E   P R E S I D E N T

Cautions

Working cooperatively with the board is essential to the success of the association. Heavy-handed or independent action by a president can put the entire association at risk. 

Presidents must educate themselves on the nature and scope of their obligations. Well intentioned but uninformed actions by a president can threaten a community’s economic and social stability.

The president must adhere to and enforce rules. Arbitrary or inconsistent application of rules weakens the association’s ability to enforce them. 

The president must see that the association’s insurance is adequate and appropriate. Federal and secondary mortgage agencies will not fund mortgages in the community otherwise, and this will affect property values.

Comprehensive Tasks: The Role of The Treasurer

The Role of the Treasurer

The association treasurer is responsible for maintaining the finances and ensuring the financial stability of the association. He or she is the financial voice of the board and liaison to auditors, CPAs, brokers, agents, and bankers. This includes a number of duties and responsibilities.

P R E PA R E   T H E   B U D G E T

The most important responsibility the treasurer has is preparing the annual operating budget.

M A I N TA I N   A S S O C I AT I O N   A C C O U N T S

The association’s documents and bylaws specify a number of financial responsibilities that the treasurer must oversee. These may include: 

** Maintaining adequate insurance coverage

** Keeping financial records

** Investing association funds

** Collecting assessments and delinquencies

** Reserving funds for future needs

** Filing income tax returns

UN D E R S TA N D   B A S I C   F I N A N C I A L   S TAT E M E N T S

The treasurer must understand at least the basic components of the financial statement:

** Assets

** Liabilities

** Members’ equity: reserves and operating fund balance

In addition, it would be advantageous to the association if the treasurer also had an understanding of the other components of the financial statement such as:

** Initial working capital

** Special project funds

** Income statement

** Statement of cash flow

R E P O RT   T O   T H E   B O A R D

The treasurer should report at regular board meetings on the state of the association’s finances based on the following information, which may be maintained and provided by the manager or finance committee:

** Balance sheet

** Statement of income

** Cash receipts and cash disbursements activity

** Unit owner balances

** General ledger activity and journal entries

** Schedule of accounts payable

** Bank statements and bank reconciliations

I M P L E M E N T   A   R E S E R V E   P R O G R A M

Reserves are a primary responsibility of the treasurer and the board of directors. The treasurer must:

** Conduct a reserve study.

** Update the reserve study periodically.

** Develop and implement a reserve funding schedule.

** Fund the reserve accounts appropriately.

S E L E C T   A   C PA   A N D   C O N D U C T   A N   A U D I T

Ensuring that the association is working with a qualified certified public accountant (CPA) is one of the treasurer’s important duties. CPAs with community association experience are better equipped to provide the expertise you need. The treasurer should work with the CPA to perform an annual audit—a very important document for a community association, the management company, and the board. Even if your association uses the services of a CPA, or if your treasurer is a CPA, all board members—especially in self-managed associations—should have a basic understanding of community association finances.

B O O K K E E P I N G

In smaller, self-managed communities, the treasurer’s duties may include bookkeeping.

F I N A N C I A L   L I A I S O N

The treasurer is the liaison between the association board and finance committee, its subcommittees, and between the board and the members on financial matters. In addition, the treasurer is the liaison to reserve study engineers, bankers, CPAs, insurance agents, investment brokers, and auditors.

M A I N TA I N   R E C O R D S

The treasurer should make sure that important financial records are safely maintained for an appropriate time.

T H E   R O L E   O F   T H E   T R E A S U R E R

Cautions

*Diverting association assets from their intended use or purpose is a very real possibility in any community association. It’s important that treasurers use internal controls to prevent the misuse of association funds.

*Safety and liquidity of association assets are essential to the community association. It’s important for treasurers to know where and how to invest homeowner’s funds to ensure their protection.

*Treasurers must decide whether to file the association’s income tax returns under Internal Revenue Service Code Sections 528 or 277. It’s important to make the right decision—the wrong one can cost the association substantial penalties.

*There are numerous important considerations when developing a community association operating budget. It’s important to avoid some and include others to maintainthe financial strength of the community.

*Check your state’s laws for specific provisions regarding audits, financial statements, delivery, etc.

Comprehensive Tasks: The Role of the Secretary

The Role of the Secretary

The association secretary is responsible for preserving the association’s history, maintaining its records, and protecting it from liability. The secretary should be efficient, well organized, and have a commitment to the future of the association. Associations with a professional manager can ask the manager to perform some of thesecretarial tasks. 

R E C O R D   M I N U T E S   F O R   A L L   A S S O C I AT I O N   M E E T I N G S

** Board meetings

** Special meetings

** Annual meetings

** Committee meetings

G U I D E L I N E S   F O R   R E C O R D I N G   M I N U T E S

** Record the association’s actions and record why they were taken.

** Preserve board members’ voting records.

** State the authority by which directors take a certain action and cite the documents granting that authority.

T H E   R O L E   O F   T H E   S E C R E TA RY

** Record all matters brought before the board, whether adopted, dismissed without discussion or vote, rejected, deferred, tabled, or simply presented as information.

** Remember that the association’s minutes are official records and admissible as evidence in a court of law.

U S E   S TA N D A R D   L A N G U A G E   F O R   R E C U R R I N G   F U N C T I O N S

Certain functions occur frequently in all meetings. Recording these will be easier if the secretary develops standard language to cover functions such as:

** Call to order by the presiding officer

** Proof of meeting notice or waiver of meeting notice

** Presence or lack of a quorum

** Reading and approval of the previous meeting minutes

** Reading and acceptance of various reports

** Unfinished business

** New business

** Adjournment

A N N O U N C E   M E E T I N G S   A N D   P R E PA R E   A G E N D A S

Notifying board members and association members of meetings is required by law. How and when notice is given is typically stated in the association’s governing documents. Agendas are essential to the success not only of the meeting, but of the association as well.

M A I N TA I N   A S S O C I AT I O N   R E C O R D S

** Store and retrieve association documents as needed.

** Devise an effective filing system, and keep files safe and accessible.

** Identify and categorize all current and stored records.

T H E   R O L E   O F   T H E   S E C R E TA RY 

** Prepare and maintain a retention schedule for document disposal.

W I T N E S S   A N D   V E R I F Y   S I G N AT U R E S

Many associations have policies to safeguard assets that require two signatures on checks or a witness to verify signatures. Generally this responsibility falls to the secretary.

M A I N TA I N   L I S T S

The secretary is responsible for maintaining lists of all association board and committee members, officers, and members, their current mailing address, and voting percentages.

V E R I F Y   P R O X I E S

The secretary accepts and verifies proxies for annual or special membership meetings, and ensures that proxies and ballots are kept in the association’s records. 

F I L E   F O R M S   W I T H   S TAT E   A G E N C I E S

The secretary is responsible for filing certain forms with state agencies. These might include employment forms, incorporation documents, and other official records of theassociation.

M A N A G E   C O R R E S P O N D E N C E

** Route correspondence to appropriate association representatives—manager, office, board member, committee chair, etc.

** Ensure that tone, form, and spelling of all association correspondence reflect positively on the association.

T H E   R O L E   O F   T H E   S E C R E TA RY

Cautions

*How and when you give notice of a meeting has a direct impact on whether the business conducted at the meeting is legal and binding. 

*It’s important to do it right. Not all association documents are public records. It’s important to know which documents must remain confidential and which must be available to members of the association and others.

*Failing to keep the membership mailing list accurate and current has legal ramifications. It’s important to know why and what to do.

The Role of the Secretary

Our first meeting in 2012 was heavily attended with more than 40 people interested to learn more about The Role of the Secretary. We're grateful to Scot Swanson, Bellingham association attorney for his useful and thoughtful comments.

In associations -- which are usually some type of corporation (or may be unincorporated) -- a secretary is a board position with separate responsibilities, different from other board members' responsibilities, but just what are they?

The Washington State law for associations isn't clear, nor are many governing documents clear about what these duties and responsibilities are. As a result, we can look to the state corporate laws to define the secretary's role.

Essentially the role of board secretaries covers paperwork, based on recording and keeping minutes, corresponding the board's communications among board members and to the membership, and finally filing, storing and retrieving the association's documents and records. Often association managers support secretaries in many of these duties, and each association must determine the efficacy of delegating these tasks or performing them in-house.

(A regular review of this checklist can help spot duplicate efforts and holes in these processes.)

BOARD MEETING MINUTES

Since this may be the most visible role, it's up to each secretary to fully understand what's required to be documented in meeting minutes, and who can read them, and when. Board meeting minutes document the actions of the board taken in their position of power, based on being elected by people (owners) who trust the board members. (This is a different scenario from publishing a newsletter about the goings and comings within the community.)

Board meeting minutes begin with an agenda. The secretary works with the president to formalize the agenda, which the secretary publishes to the board and to the membership within the proscribed time period, based on the type of board meeting being called. Your governing documents are specific about the length of time and type of notice required for each kind of board meeting.

Finalizing the drafts, sending them for review and suggested edits by board members, and publishing them in draft or unapproved form all take place soon after the board meeting. When board meeting minutes are finally approved -- usually at the next board meeting -- they are published as 'approved' or final minutes and become the permanent, legal record of the actions taken by the board on behalf of the corporation and its members.

You can read more in this booklet, published by Communications Association Institute, The Board Secretary: Roles and Responsibilities in Community Associations.

A few caveats about board meeting minutes:

• Less is more: beware of too much detail
• Recording meetings is not a good idea, since these recordings can be subpoenaed, and transcription can be expensive
• Minutes document board actions: they are not written to educate members (newsletters can educate)
• Minutes are used by courts, because they are legal documents -- a history of the association's business
• When directors descent, it's a good idea to note vocal disagreements.

A few tips for board meeting minutes:

• Include minimal financial details in minutes
• Document all withdrawals from reserves and include the repayment plan
• Require that committees prepare written reports for the board packets, and attach the reports to the minutes when archived -- don't publish committee reports to members.

FIDUCIARY DUTIES OF ALL DIRECTORS AND OFFICERS

Board members operate with the trust of owners. Board members hold the power to act on behalf of owners. Honouring this trust is key for any director or officer in board work.

There are several phrases that define ways in which board members can regard this fiduciary duty, and they are written within Washington State Law.

• The Condominium Act (RCW 64.34.308) defines 'ordinary and reasonable care' as a guideline for officers.
• The Non-profit Corporation Act (RCW 24.03.127) defines that officer's work be for the 'benefit of the corporation'.
• The Miscellaneous Corporation Act (RCW 24.06) uses the 'business judgement rule' as a guideline for officer's efforts.

It is imperative that all officers wear the 'hat of the association' when doing board work, and remove their 'personal interest hat' so as to benefit all the owners who have invested their trust in board members.

DIRECTORS AND OFFICERS INSURANCE
Include this coverage in your master policy -- it provides automatic indemnity for board members.


See other posts on this blog for A Guide to Taking Perfectly Proper Minutes and a Template for Board of Directors Meeting Minutes.

Master Insurance Coverage

We are lucky to have Duncan Kirk so close to us: his visit to the Forum in March helped many of us focus on this critical issue.

There may be nothing more critical, mysterious and confusing as master policy insurance and how it is required to cover the real estate assets that we own in common with all other owners. Duncan de-mystifies it and is fully willing to engage in questions and answers so that anyone can learn the basics of master insurance coverage.

Duncan makes many general points to consider when evaluating your coverage, including

• Read your governing documents to determine what they require in terms of basic coverage
• Be smart about what additional coverage you need relative to floods, earthquake and other natural disasters
• Absolutely encourage owners -- make it a requirement if possible -- to take out HO6 policies on the interiors of units not covered by the master policy
• Require owners to document their upgrades, so that master policies that cover them are appropriate
• Choose backward-reaching coverage for Directors and Officers policies, to protect past board members
• Establish values for your real estate assets using sources other than insurance models
• Work with a knowledgeable vendor when choosing master insurance coverage -- and plan to work with the vendor for several months before coverage can take effect

Digital Collaboration for Boards -- How to Use, Lose and Abuse The Internet

The Internet has crept into our lives since 1994, when Web Addresses -- Uniform Resource Locators -- were developed, and now, we all have at least one.

In the 1990s, the early days of Computer Literacy and product-centric Authorized Training Centers, learners sought out ways to learn and master the technology. (Master the mouse by playing Solitaire, was a common tip.)

Today, apparently, communication has been converted from in-person meetings to All Electronic Communication. The technology is full of advantages, disadvantages, pitfalls and black holes of abuse.

When we combine Internet URLs, how electronic tools are employed, and modern communication technologies, we can find our selves involved with Always-On-All-Electronic-Communication.

What does All Electronic Communication mean for board work?

NB Disclaimer: Please review this article and implement its recommendations at your own risk. There are legal pitfalls into which you do not want to fall. All digital communication is recoverable, searchable and can become evidence in a judicial proceeding involving the business of the board. If required by law, you must produce it.

What is the Basis for Digital Collaboration?

Board members each own different and separate hardware technologies for digital communication which can include the classic personal computer, of at least two different flavours, Apple© iPads© and its competitors, Apple© iPhones© and its competitors, and all other manner of digital devices. (When connected online, each device has its own URL.) 

Software technologies are even more prolific, given that each hardware device employs more than one software application -- 'app' -- one to operate the hardware and others to perform tasks that help people save time, money and possibly brain cycles.

There is no standard, and usually standards are required for collaboration. Why are there no standards? Because every vendor -- hardware or software -- sells 'exclusive features' that are inherently incompatible with their competitors' features. 

However, there are ways to narrow incompatibilities, as developers of Internet browsers -- an application that affords interactive access to the Internet -- will attest. There are only a few Internet browsers, such as Internet Explorer© , from Microsoft©, Chrome© from Google©, and Safari© from Apple©. Other browsers run on more personal devices, such as Opera Mini Web Browser© from Opera Software ASA©.

Graciously, most Web sites are built to appear the same way in the most popular browsers, regardless of the underlying digital tool a person has chosen to use to access the site.

How to Use Digital Collaboration

First, the board must agree that there will be times when digital collaboration -- even digital exchanges -- must take place. 

If all board members meet up regularly in person, digital exchanges and/or collaboration may not be required. If this is true in your community, you need read no further.

Best practices dictate that the board agree -- with every new board turnover -- on guidelines, frequency, and purpose for employing digital collaboration. Just because we all use e-mail, it doesn't mean automatically that board work can or should be accomplished therewith.

     Start with Basics
An e-mail account with a few guidelines can get you all started.

• Set up an e-mail account to be used only for board work. Segregating board e-mail accounts from your personal account means that when your e-mails, text messages and other digital communication messages are subpoenaed, no one else will be able to review your personal news or job-related business.
• Agree on a response window. Monitoring your board e-mail should take place perhaps daily or every 48 hours. Instantaneous responses are unreasonable for this level of collaboration.
• Agree on what to discuss in digital communication. You probably don't want to leave a digital footprint about matters that belong in executive session, or personal details about anyone, these issues being better handled by telephone or in person.
• Announce it to the membership in a board meeting. Owners need to understand how digital communication affects the business in which all owners are invested. It's fair that the above elements be included in the board motion that confirms the use of digital communication both among board members and within the community as a whole*.

__________ 

* Verify with your association attorney that you have followed the appropriate steps to legally collaborate using digital technologies in your board work. This reliance may be on your corporate status, board resolutions to do so, and/or previous board motions.

• Establish a separate community digital communication option. Best practices dictate that digital communication from all owners/ residents/ people involved in the community be standardized, so that the board pro-actively accommodates community-centric communication.

Without endorsement, MeetTheNeigbors.org is an interesting option. A private Facebook page leveraged off an owner's personal page with only approved visitors is another option. The key is approving visitors before they can access the community's site. 

• Maintain professionalism. Limit board messages to the facts. You can leave the emotion, adjectives and opinions off the message, since they add no value.
• Add a Useful Subject Line. This makes messages and threads easier to locate.
• Use One Message for One Topic. When you have an 'oh, by the way' on another topic, create a separate e-mail string.
• Write in complete sentences. Over time, complete sentences 'stand up' better to scrutiny, and can eliminate misunderstanding as to your intention. 
• Implement an Undo Feature, review and edit messages, and think before you click Send. Corporate and professional standards dictate that your expression in digital communication may reflect on your judgement and ability to conduct business.
• Include all board members in messages. Avoid starting a clique or subset of decision makers in your actions. As well, include all board members on messages sent to vendors or advisors, so that everyone can maintain currency with an issue. 
• Send carbon copies. When including all board members or relevant vendors/ advisors, include their e-mail addresses in the CC box. Collaborative board members rarely act alone.
• Hide e-mail addresses when appropriate. When sending e-mail to the entire community, you can include board members' e-mail addresses in the CC box, but include all members' e-mail addresses in the BCC box, so that personal e-mail addresses of members are not compromised by your making  them visible.
• Add an automatic signature. You can include details such as [your name], [your role], [your association name], [other permanent details, including your phone number, association manager contact details, and so forth].

    Collaborating on Working Documents
When it comes time to generate board meeting minutes, budgets, presentations for board meetings and so forth, you can work together online using collaborative tools to produce these documents together. 

NB: There are several options, including Microsoft© Office© products, and Apache© Open Office that collaborators can use, and my personal preference is Google© Docs©. Why? Google Docs is free, intuitive and easy to use, even for novice collaborators, because the functions and commands are simple and straightforward. Plus, did I mention: Google Docs is free.

It's easiest when all board members have G-mail accounts when you want to work with Google Docs. An easy option is to include board member's initials followed by two words from the community's formal name. An example might be BHLNightmareAcres at gmail dot com.

• Tips and Tricks -- one board member is the Owner of a publication, and the Owner can Share it with others. When choosing to Share documents, the Owner can establish Privileges for editing. (My capitalized words appear in the user interface on Google Docs.)
• Real Time Collaborative Options -- board members can collaborate on a shared document at the same time, and all edits, revisions and comments are displayed for everyone.
• Publishing Options -- once finalized, you can download the document, spreadsheet or presentation to a universally-accessible .PDF format, or to other more software-specific file formats.
• Caveats -- this collaborative option is not as robust as some of the fee-based tools, so features you need may not be available. But for most purposes, this free tool is robust enough to document board work.
• Test Runs -- collect for an hour at someone's unit with a protected Wi-Fi 'spot', and work with all board members to develop individual board-specific e-mail addresses and test collaboration on several types of documents while you're all in one place. (A public Wi-Fi hot spot is not recommended.) Verify that everyone can operate the digital board communication tasks at the same level.

NB: Some personal devices, i.e., non-computers may not display attachments or provide ways to work with attachments.

How to Lose Digital Collaboration

Best business practices dictate that whenever an official document is prepared by the board and becomes part of the permanent business record, a back-up copy be generated and kept in an off-site location. This may be the association's physical, hard-copy archive boxes, an electronic copy saved to a permanent electronic storage area that belongs to the association, and so forth. 

The association's management company may be able to assist in backing up digital files and documents.

NB: There are occasions when Google Docs becomes 'unavailable' for some reason, which can thwart any effort to meet a deadline when it happens. People who use digital tools must always be prepared with 'plan B' in the event of the loss of the tool.

Best practices dictate that people who employ the Internet in their work pay for the highest grade of anti-virus software that they can afford. Computer viruses can invade a computer or other digital tool, and capture passwords, hack accounts, documents and so forth.

Protect your computer and digital tools, so that your board work is not compromised by hackers.

How to Abuse Digital Collaboration

One sure way to abuse digital collaboration in your board work is to leave an emotional footprint on any topic. Of course, you can express your opinion, but doing to emotionally, with emotionally charged words may compromise you, your reputation and dilute your ability to lead so that others will follow or trust in your work product.

Another abuse is to use your board e-mail address for other work, including personal work, professional work and so forth. Use your board work digital tools only for board work.

Treat all owners equally in your digital work: don't leave an owner off an e-mail meant for all owners or withhold details/ data from an owner when you communicate electronically. 

Maintain transparency in your digital work: verbalize research results and collaborative dialog in person at board meetings, so that there are no 'secrets' or potential for accusations about 'secret meetings' based on your digital collaboration.