Adams Stirling PLC


Treasurer Must Be a Director. There was a time when boards could appoint non-board members to be the treasurer. That changed when the Governor signed into law Civil Code § 5500 and § 5501. Beginning January 1, 2019, boards of directors must review their association's financial records on a monthly basis (Civ. Code § 5500.) Boards can delegate the task to the treasurer and other board member but the state is clear that the treasurer must be a member of the board: 

The review requirements of Section 5500 may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member, reviews the documents and statements described in Section 5500 independent of a board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting. (Civ. Code § 5501.)

It means that dispite anything to the contrary in an association's governing documents, treaurers must now be board members.

Authority of the Treasurer. Treasurers do not have unlimited authority over the association's monies. Unless the governing documents provide otherwise, a treasurer's duties are as follows:

Treasurer's Report. It is industry practice to have the treasurer give a report at regular meetings of the board. The "Treasurer's Report" may be written or may consist "simply of a verbal statement of the cash balance on hand--or of this balance less outstanding obligations."The report does not require any action by the board. (Robert's Rules, 11th ed., p. 477.)

No action or acceptance by the assembly is required--or proper--on a financial report of the treasurer unless it is of sufficient importance, as an annual report, to be referred to auditors. (Robert's Rules, 11th ed., p. 479.)

The general practice is to have minutes reflect that "A monthly financial report was submitted to the Board." or "The Treasurer's report was given." or "An interim financial statement was received by the Board along with the Treasurer's report."

Assistant Treasurer. If the treasurer needs assistance with his/her duties, the board can appoint someone, such as a homeowner with experience with budgets and accounting, to be "Assistant Treasurer." This should be done be a motion in the minutes. 

Delegating Authority. When it comes to paying bills, the board can empower the treasurer to pay routine, recurring expenses such as utility bills and insurance premiums. As a safeguard, the board can set a dollar limit on the treasurer's payment authority. However, the board is still responsible for overseeing the treasurer's actions. Accordingly, the board should establish internal controls and regularly review the treasurer's activities and the association's finances. Otherwise, the association will be vulnerable to the improper handling of association finances up to and including embezzlement and the board could be held in breach of its fiduciary duties.

Bank Signature Cards. See bank signature cards and two signature requirement

Managing Agent. When documents are silent about check signing, many associations allow their managing agent to pay routine operational expenses such as utility bills, insurance premiums, contracted services (pool cleaning, elevator maintenance, cable TV, etc.) without director signatures. To limit their agent's check signing authority, boards require that any unusual expenses or expenses above a certain dollar amount first receive board president authorization or full board authorization or the signature of at least one director. The procedures vary from association to association.

Recommendation: The authority to transfer funds, whether given to managing agents or limited to directors, creates potential for unauthorized transfers. To protect the association's funds against embezzlement, boards must (i) be diligent in reviewing bank statements and reconciliations, (ii) establish internal controls, (iii) carry a fidelity bond, and (iv) conduct annual independent reviews.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

Adams Stirling PLC