The Finance Committee comprises members of our community association, which enables residents to have a say in how their money is spent. How does this committee work and who serves on it?
The Treasurer’s and Accountant’s Roles
It makes sense for the board treasurer to chair the finance committee. As chair, it’s the treasurer’s job to keep everyone on track as the budget is prepared. The treasurer also presents the budget for approval to the board and members. If the association works with an accountant, he or she may offer consulting, but the accountant really has no significant role in the process of devising the budget.
What the Committee Does
The treasurer will make sure that all committee members understand the three basic components of the budget:
- Funds needed for daily operation of the community, such as common electricity and water, grounds maintenance, management, insurance, and general maintenance. These expenses are either contractual or can be reasonably estimated based on experience. An important consideration when looking at items in the operating budget is the expectations of the community—for example, do members want a landscaper who is a “blow, mow, and go” type, or do they want a landscaper who provides a higher level of service?
- Funds needed to maintain our reserves at sufficient levels. Reserve funds provide money for the repair and replacement of the community’s assets—such as the pool, roofs, pavement, etc.
- Funds for additions or enhancements to the existing property. This is a function of what members of the community want and are willing to pay for. The community should provide input and approval for this component.
Armed with this knowledge, the committee will estimate total expenses for the coming year and compare that sum to the association’s potential revenue (assessments, interest on investments, concession income, and so on). If expenses are greater than revenue, the committee will look for ways to lower expenses without compromising service. If that doesn’t balance the budget, the committee may have to make a tough decision—whether to increase assessments or levy a one-time special assessment.