Dear Paul: Recently our Treasurer informed the Board that we should no longer be approving our monthly financial statements received from Management. The explanation was a bit flimsy. Can you shed some light on this situation?
Dear H.H.: Your Treasurer is correct in requesting that this change be made. Unless your governing documents state otherwise, whenever the board approves an action, it means that the condo corporation owns the action and is responsible for anything that results from the approval. When it comes to financial statements unless an external auditor or a board appointed audit committee performs a review to ensure their accuracy and correctness, the board would be taking full responsibility for the data. Normally, an audit is performed only once a year, not monthly, thus the board cannot attest to the accuracy of the statements. As a result, it is recommended that the financial statements be filed with the secretary. This does not preclude any discussion or requests for clarification of the statements. No motion is required for simply receiving and filing the statements for information.
The following article makes the point in a bit more detail:
Approving the treasurer’s report is not advised
Only audited financial reports should be adopted by an organization.
A typical meeting agenda includes a report from the treasurer. As a professional registered parliamentarian with Michigan State University Extension, I often notice that many groups place the treasurer’s report just after the approval of the minutes on their agendas. Logically, this makes sense as it is important to know the status of a group’s finances before discussing other matters. Following the treasurer’s report, however, I often observe that the presiding officer asks the group for a motion to approve or accept the treasurer’s report. This is an ill-advised custom and a common mistake that groups make. Unfortunately, only groups who have been through litigation having had to take a member to court over financial misfeasance or embezzlement understand the importance of not approving financial reports whose accuracy the board cannot fully substantiate. Allow me to explain:
The treasurer’s responsibilities within an organization vary, but the treasurer is generally the officer entrusted with the custody of its funds. According to Roberts Rules of Order, Newly Revised 11th Edition, “The specific duties of the treasurer will vary depending on the size and complexity of the society; but this officer cannot disburse funds except by authority of the society or as the bylaws prescribe. The treasurer is required to make a full financial report annually or as the bylaws may prescribe, and to make such interim reports as the assembly or the executive board may direct.”
Following a regular report of the treasurer, the presiding officer may ask the members if there are any questions about the report. Once questions are complete, the chair should state that the report be placed on file for audit (if the group has an audit committee or sends their financials to a professional auditor) or for review (if the group has an internal committee review the finances for example) or simply move on to the next item of business.
The report should be filed with the secretary. There is no required action needed. Instead, it is the auditor’s report (or review committee’s report) or Treasurer’s annual report (which has been audited) that is adopted by the group. The audit report may come before the group based on the organization’s rules. It is advised that an audit of some form be done annually or, at a minimum any time there is a change in officers. The specifics should be described within the group’s governing documents.
The treasurer is an office in which a group places a great deal of trust and therefore it seems that an assembly would believe their reports are accurate. However, without an audit or third party review of the statements, activity, receipts and process there is no way to ensure reports are correct as presented. So, unless an organization’s by-laws specify adopting your treasurer’s report, it is not recommended. I know of no federal, state, local or parliamentary rule that states the treasurer’s report is to be adopted.
This is one in a series of articles on parliamentary procedure and how to conduct more effective organizational meetings. For a complete list in this series go to the Parliamentary Procedure resource.
This article was published by Michigan State University Extension.