Treasurer: Owner vs. Non Owner

All, I'm a new member and am hoping to get some advice. Our Treasurer has been a board member for three years, the last 18-24 months of which he has resided in an urban area several hours drive away. He has rented out his unit in the meantime and has visited the property a couple of times per year. Recently, he sold his unit and is no longer an owner. Our bylaws state that he is no longer eligible to serve on the Board. Our bylaws also state that you don't need to be a board member to be the Treasurer. Some board members would like him to continue as Treasurer for the rest of the year. Others are not in favor of a non-resident non-owner as Treasurer. Board members are also divided as to his performance with some pro and some con. There is no reason to think that there would be any potential criminal issues with him remaining as Treasurer. He will pretty much continue to do things as he has done in the past. But some Board members just don't feel comfortable at all with the idea of someone who isn't an owner and who doesn't live on the property or even in the area as Treasurer. I have raised this issue with some members who are neighbors and the response to him remaining has been strongly negative. Efforts to find a replacement are under way.

So recognizing that our bylaws permit him to remain Treasurer, I would like to ask for opinions as to whether this makes sense for "an association" as a general case. I recognize that ultimately it's up to us, but what do people think? Would your Board do this? Are their any legal issues involved by his remaining in the position that you can think of? Any issues from an auditing perspective? Would this be consistent with our fiduciary responsibility as a Board? What would your members say in response to a similar situation, do you think? Would you feel comfortable with him continuing?

Thanks,

Time to look for an accountant. Can still have the Treasurer position.Just contract out the financials. The owner treasurer can be responsible for getting the reports from the accountant and present it to the board. Unless your rules dictate the treasurer actually manages the money, do not see why they can not just report it.

All, thanks very much for the replies.

I can't speak as to why the Treasurer would want to continue as there has been no correspondance with him that I am aware of. Part of the problem is that our bylaws are not clear as to the "how" of the "how this would work in practice". Can a non-owner, even if Treasurer, participate in Board meetings and speak but not vote? Don't know. Can he participate in Board correspondence? Don't know. Is his opinion limited to commenting on what a given course of action would be in terms of how much it would leave us in the bank or can he tell us what he thinks as to whether a course of action is good or bad for the Association? Don't know. Neutral? Supporters and detractors so hard to say.

Hiring a CPA might make sense depending on the cost. It's been floated before and maybe it's time to revisit that. The trouble is that we're a $1m organization and the budget is tight. So maybe it makes sense to explore a CPA and see exactly what they would do and what the price would be.

So there are just so many unknowns in practice that need to be considered here. One of the reasons I've reached out to you guys. Again, many thanks. I'll continue to monitor for more thoughts.

Thanks Melissa, that's good counsel. Part of my hesitation is that our PM does all of our accounting, invoicing, bill payment and collection. They're kind of integrated in that sense. So if we went to a CPA, we'd have to transfer all that and then adjust the PM contract for those functions they would no longer perform. So maybe we should explore the CPA thing and maybe the answer is to split what our PM does into components and let them do what they do best and the CPA does what it does best.

Do you mean, Chris, that your HOA has a budget of $1 mill.? Or does the $1 mill. refer to something else? And you don't have a property mgr.?

I should think that if you keep this guy, he may not make decisions that directors make, e.g., selecting vendors for contracts. He certainly should not be privy to executive session matters like delinquencies & fines. Who now handles these matters, Chris? Your state's corporations codes may offer some insight

When we had a treasurer for a couple of months who was not a director (she is an owner), she didn't attend our executive session; she basically made recommendations to the board, but I don't think she had a vote. I just can't quite remember

Officers are part of the Board Meeting. Officers report to the Board the status of their tasks or responsibilities. Resident or non-residet, owner or non-owner, the Officer would participate.

Start thinking in terms of position vs. terms of member/non-member.

We used a bookkeeper for many years. The Bookkeeper attended all board meetings in order to answer any questions about assessment payments. If there were no questions, the bookkeeper just sat there.


The duties of his Office would require them to participate in the correspondence.

Again, think about the Office and those duties not the individual filling that office.


That would be up to the Board.

Personally, I would welcome opinions from everyone attending the meeting as someone might see a better way of approaching an issue than the board is.


Wouldn't you have all the same questions listed above if you hire a CPA?

Last time we looked into it, it was going to cost more than we were paying our bookkeeper which was $400 per month. Additionally, the Treasurer would have picked up more duties as the CPA wouldn't do everything the bookkeeper was doing.

Thanks all, we are an HOA with a $1m total budget...The comments have been very helpful and yes, I'm going to bring this up at the next Board meeting. No one that I know of has been in contact with the Treasurer to discuss the situation and he has not sent around an email indicating a continued willingness to serve. This would be unprecedented for our HOA as we've always had board members/owners as Treasurers for 40 years. But there are a couple of Board members pushing very hard to retain him in the position and I have to respect their business rationale for doing so even if I don't agree with it.

I personally think we should find a) a board member willing to take over the position b) an owner not on the Board but who lives in the property or c) an owner who lives in the area and can attend meetings and drive to the property to check stuff out. That's the course of action I will be pushing for. We will never know if there are alternatives if we don't look for them.

Thanks again...and more comments are welcome...

Sorry, Carol..forgot to reply on this. Yes, our property manager takes care of all of our financial matters. they do all of our accounting, bill pay, invoicing, owner collections and maintain our bank accounts on our behalf. That's sort of the standard configuration for how these companies work in our area. They're basically one-stop full service shops that take care of an HOA from soup to nuts in terms of services. they do owner correspondance, admin support, emergency services, vendor management (if you pay them enough), web site, etc. You could contract out each piece of the value structure to a separate entity, for example taking away the accounting part and giving it to a CPA but then you'd have to go back and renegotiate the property management contract to account for this and that might be tough. It would also be more difficult for a part time board to manage in terms of complexity.

And the other issue with getting a CPA in here is that at the end of the day, you still need someone to oversee that CPA's work - so you're back to a Treasurer in one form or another. All getting a CPA accomplishes, unless I'm missing something, is upgrading the quality of the accounting and the professional ethics. Which isn't a bad thing, to be sure, but my point is that you would still need someone from the Board to oversee them.

As near as I can tell, our treasurer performs the following functions

1. Approves all invoices - takes up about 80% of time spent in the function

2. Invests the money - which boils down to CDs - nothing complicated here

3. Approves all checks

4. Works with our auditors once a year

5. Works with the management company to set up GL classifications and correct any accounting errors (which don't happen very much if at all)

5. Works with the property management company to prepare the annual budget - not too difficult as 50% + of our expenses are outside our control - utilities and all that...

No special financial analysis is provided on a monthly basis to the board nor is there any special analysis for a project, ie what will be the impact of something or other if we don't do thus and so.

So from my perspective, having CPA experience for the function would be nice but I think it's a bit overkill - unless the full range of the CPA needs are there and/or unless the full range of CPA talent is used proactively.

The business rationale provided by the directors is as follows:

1. He's here and he's done a good job (other directors dispute this)

2. He's now a neutral party (other directors dispute this)

My sense is that it's an option under consideration only because it's the easiest path to take. But it would break with decades of precedent. Other directors are calling for a call for candidates and not to confirm the Treasurer in his position for the rest of the year until we have looked at other options. That's where I'm at, personally. I want someone who can attend meetings live and walk the property and inspect the work that is associated with a given invoice. I think having a non-owner AND a non-resident is possible but I also think it will probably engender a lot of unnecessary conflict ("well, that's his opinion but he's not an owner" sort of thing). But I guess we'll find out...

Thanks,

Ahhhh, so as with my HOA, you have a PM who does a whole lot of the work that a treasurer would do in a smaller-budget, uncomplicated HOA with no PM (many of these are self managed, where the Board does all of the duties you listed.) I was wondering how an HOA board with a $1 mill. budget could do all of the treasurer and other functions effectively. I agree with you, Chris, that a CPA would be overkill in your case. I apologize for missing your PM reply of earlier.

You might be able to entice some other director or homeowner to be the treasurer if some of the duties were spread out. This also would give you more checks & balances. At the end of the day (as they say), the entire board is responsible for your finances anyway. Here are some things that we do:

1. Our treasurer chairs a Finance Committee of five homeowners, two of whom are directors including her. She brings investment advice to the FC--this is her main role and she's constantly scrambling for better returns on our investments. The FC then recommends investments to the board of seven for its meeting a week after the FC meets. We have several investment accounts.

2. The FC reviews the annual budget as fashioned by the PM, and makes a rec to the Board. Some directors are very fastidious about reviewing the data & rec and others have no understanding of it. Ditto the annual audit. Ditto the invoices. Ditto checking for accounting errors.

3. The PM brings bids, proposals, etc. directly to the Board and writes a report for us about the effects on our annual budget or reserves accounts.

4. All four officers of our Board have check signing authority.

That some feel the treasurer is "neutral" raises a couple of questions. What is it about his tasks that make "neutrality" important? I guess I'd worry that the investments that he recommends are those that he has a special interest in.

How in the world does he sign checks in a timely if not living on the premises?