DAWN Ontario: DisAbled Women's Network Ontario

Board Development Toolkit
The Role of the Board Treasurer

 

 

The Role of the Board Treasurer

Summary


The Treasurer's role is the most important function on the Board, after that of the Chair. Financial accountability is of the utmost importance to non-profit associations. If your funders lose faith in your ability to control and account for finances, they lose faith in the whole organization.

In the attached pages, the role of the Treasurer is outlined as follows:

  • the Treasurer's job description
  • the roles of the Treasurer, Bookkeeper and Auditor
  • the balance sheet
  • the development of the budget
  • monthly financial statements
  • glossary of financial terms


Page Contents

The Role Of The Treasurer

Treasurer's Job Description

Developing And Monitoring The Budget

The Balance Sheet

Balance Sheet - Assets - Sample

Balance Sheet - Liabilities - Sample

Is the Budget Realistic

Budget & Actual Report

Report on Year's Budget (Y.T.D. minus B.T.D. = Variance)

Using Past Budgets for developing Proposed Budget

Monthly Financial Statements

Sample Treasurer's Report

Glossary of Financial Terms


The Role Of The Treasurer

In the case of smaller associations, the duties of Treasurer may be combined with those of the Secretary. If this is the case, the individual holds the title of Secretary/Treasurer. However, in the following pages, only the Treasurer's specific responsibilities will be discussed.

In addition to being a critical role for the association and the Board, the Treasurer's role can be difficult because of its technical nature. Often, non-financially trained Board members leave all responsibility for finances to the Treasurer, preferring not to try to figure out what all the numbers mean. This means that the Treasurer not only has to take primary responsibility for finances, but also has to educate sometimes unwilling Board members about what the finances mean. Leading the Board is an important task the Treasurer must perform.

Since the Treasurer is ultimately responsible for the finances of the corporation, the Treasurer should keep neat and accurate records and pay attention to detail. She should be available so as to handle transactions on a timely basis and should not be afraid to ask questions.

Further information on the Treasurer's responsibilities is contained in the following job description.

 

Board Treasurer's Job Description


Title:
Board Treasurer

Purpose:
To manage and report on the association's finances.

Responsibilities:

1. Carries out the responsibilities of a member of the Board of Directors.

2. Assists in the preparation of the budget.

3. Monitors the budget.

4. Ensures the Board's financial policies are being followed.

5. Reports to the Board of Directors and general membership on finances.

6. Prepares any required financial reporting forms.

7. Maintains all bank accounts.

8. Oversees all financial transactions.

9. Treasurer's signature should appear on all cheques of the organization with the second signature from any of the board's other directors or staff with signing authority.

9. Chairs the finance committee.

As is stated in the job description, the Treasurer is first and foremost a member of the Board. This means that the Treasurer is responsible to the members (as with every Board member) and to the funders for the funds received and spent by the association.

The assumption in this job description is that the Treasurer takes a "hands-on" role with respect to the association. A hands-on Treasurer should go through a monthly routine which would vary depending on the level of involvement. At the very least, a Treasurer should meet with the staff person on a regular basis to go over invoices and cheques, to review the bank statements, and to monitor the preparation of monthly statements for the Board.

If the association has a Treasurer, a bookkeeper and an auditor, the functions of each can become quite confusing. The following chart outlines the roles of each of these individuals.


Roles of Bookkeeper, Treasurer, Auditor

Bookkeeper
Treasurer
Auditor
  • Paid staff (occasionally a volunteer)

  • Hired by the Board

  • May sit on the Board if unpaid
  • An officer of the corporation)

  • Sits on the Board

  • Cannot be paid for carrying out duties of Treasurer

  • Can vote
  • Services paid for by the corporation

  • Board recommends to membership that a particular Auditor be hired

  • Auditor is appointed at the Annual General Meeting

  • Auditor does not sit on the Board
  • Keeps full and accurate accounts of all receipts and disbursements
  • Works along with the staff person to monitor activities of Bookkeeper

  • Ensures accurate accounts of income and expenditure

  • Ensures all receipts are deposited in such bank accounts as determined by the Board

  • Ensures the Board receives monthly financial statements

  • Submits books to auditor for preparation of financial statement and/or performance of an audit

  • Prepares yearly financial statements and/or conducts a yearly audit
  • Once the auditor's financial report has been accepted by the Board, the Treasurer prepares a report and presents it to the membership at the Annual General Meeting
  • Prepares annual financial report and presents it to the Board



Developing And Monitoring The Budget

One of the most important responsibilities of the Treasurer is to monitor the budget. Keeping track of income and expenditures is one thing; keeping track of the budget is another. The Treasurer needs to inform the Board on a regular basis as to whether income and expense projections are turning out as predicted. If not, the Board needs to make the appropriate adjustments.

The Treasurer also takes a lead role in the preparation of the budget for the upcoming year. By developing a balance sheet to assess the financial health of the association, and by analyzing the current budget and comparing it to the last budget, the Treasurer, along with the staff person, should be able to develop a budget that can satisfy the needs of the association while being fiscally responsible.

 

The Balance Sheet

One of the keys to understanding the financial position of the association is to gauge the association's financial condition at a specific point in time. The following chart is a balance sheet which reflects the association's overall financial condition. It shows how much the association has (assets), how much it is owed (assets) and how much the association owes to others (liabilities) at a given point in time. Assets minus liabilities indicate your equity. A balance sheet, then, is a snapshot of your financial condition at any one time. The Treasurer needs to prepare a balance sheet like this before developing a budget for the next fiscal year.

Preparing a balance sheet

The Balance Sheet provides a "snapshot" of the organization’s financial standing at a specific point in time. All of the assets, liabilities and the fund balance or net worth are listed. The Assets section is listed first followed by the Liabilities and Net Assets section. Assets should equal the Liabilities and Net Assets.

Included under the Assets section are Current Assets and Fixed Assets. Current Assets are cash-related items such as the ending balances of all checking and/or savings accounts as of the date the Balance Sheet is prepared. Amounts owed to the organization or accounts receivable (dues owed but not yet paid if accounting is done by the accrual method) should be included in the Current Assets section as well. Fixed assets such as equipment that is owned by the local, buildings, etc. should be listed in the Assets section under the heading Fixed Assets. The Current Assets along with any Fixed Assets make up Total Assets.

The other major section of the Balance Sheet is the Liabilities and Net Assets section. Liabilities are the debts that are owed by the organization. They include amounts owed for items purchased on credit (accounts payable), salaries owed to employees but not yet paid, per capita owed to affiliates and taxes or loans that are also payable.

The Net Assets section refers to the combination of Unrestricted, Temporarily Restricted and Permanently Restricted Assets. The difference between the balance(s) at the beginning of the period in the checking and/or the savings accounts and the balance(s) stated above in the Assets section is calculated and listed as the Unrestricted amount. Assets that are being held for a specific purpose or are under the control of outside donors are considered either permanently or temporarily restricted. If the balance(s) at the end of the period is more than the beginning balance(s), the result is a surplus. If the opposite is true, then the Balance Sheet will reflect a deficit. The Total Liabilities along with the Total Net Assets should equal the Total Assets amount. This figure would be depicted at the bottom as the Total Liabilities and Net Assets.

Tip: Balance sheets are prepared at regular intervals such as the end of the month, quarter or year. The balance sheet reflects a specific date rather than a specific time period.

 

Definitions (For Your Info)

Asset: an item of value owned by the organization. An asset may be in the form of cash, securities, equipment, or real estate, etc.

Corporation: In the case of a non-profit organization, the corporation refers to an organization with letters patent, incorporated without share capital.

Liabilities: any obligations by which an organization is bound to pay a sum expressed in dollars, or having to give up some asset having a monetary value. Local unions obligations or debts.

Fund Balance: appears between the bottom of the Statement of Activities or Balance Sheet and is the difference between the Total Assets and Total Liabilities.

Net Assets: are the amount that would be left over if all of the union’s assets had to be sold to satisfy all of the union’s liabilities. Sometimes called Net Worth or Members’ Equity.

Current Assets: those assets which mature into cash in one year or less (CA).

Accounts Receivable: dollars due from customers as a result of selling services or inventory on terms which allow for delivery prior to the payment of cash. The transaction exists as a receivable on the balance sheet until cash is collected from the customer (A/R).

Inventory: the goods and materials a company sells to make a profit. Inventory exists in three forms: raw materials, work in progress, and finished goods. In the process of selling inventory, either cash is received or an account receivable is created (INV).

Prepaid Expenses: when cash is used to purchase a good or service, the benefits of which will be realized or received within the current year (12 months).

Fixed Assets: physical assets which have life in excess of one year. This includes land, buildings, machinery, equipment, furniture/fixtures, and leasehold improvements (FA).

Net Fixed Assets: Also known as the book value, the net fixed asset is calculated as the purchase price of the asset (gross fixed asset) less the accumulated depreciation (the sum of the annual amounts charged for the "wearing out" of the asset) (NFA).

Notes Receivable: a loan made by the company which is evidenced by a promissory note (N/R).

Intangibles: assets which have no physical properties or "set" values. Examples of intangibles include patents, research and development, and goodwill (INT).

Current Liabilities: what the company "owes" which must be paid within one year (CL).

Note Payable Bank: obligations evidenced by a promissory note from the bank which have maturity dates of less than one year (N/P).

Accounts Payable: amounts due to suppliers who have provided inventory to the company (A/P).

Accruals: obligations owed but not yet billed (ACCR).

Current Portion of Long-Term Debt: the portion of a long-term loan (principal only) which is due within the next 12 months (CDTD).

Long Term Debt: the portion of a term loan which does not have to be paid within the next year.

Staff person: refers to an individual within the organization/corporation employed by the board.

Subordinated Officer Debt: Cash the officers have invested in the company which is subordinated to any bank financing the company has received.

Net Worth: The owner's investment or "equity" in the company which may be either "purchased" or "earned." Purchased equity consists of preferred stock, common stock, and capital surplus. Simply put, the net worth is the difference between the assets and liabilities of a company (NW).

 

Balance Sheet - Assets - Sample

Sample Organization
BALANCE SHEET
As of March 31, 200_

ASSETS
CURRENT ASSETS

Petty Cash
Operating Bank Account
Project 1 Bank Account
Project 2 Bank Account
Term Deposits
____________

Total Cash
: ____________


Grants Receivable
Accounts Receivable
G.S.T. Rebate Receivable
____________

Total Receivables : _______________


Inventory
Prepaid Insurance
Prepaid Expenses
___________

Total prepaid Expenses : ______________


TOTAL CURRENT ASSETS _________________


FIXED ASSETS
Office Equipment
Accumulated Depreciation
___________



Computer Equipment
Accumulated Depreciation
_____________


Leasehold Improvements
Accumulated Depreciation
____________


____________

TOTAL FIXED ASSETS ________________
___________

TOTAL ASSETS

 

Balance Sheet - Liabilities - Sample


LIABILITIES

CURRENT LIABILITIES
Accounts payable
Accruals
Vacation Payable
EHT Payable
EI Payable
CPP Payable
Income Tax payable
______

Receiver General Payable
WCB Payable
G.S.T. Payable
G.S.T. Recoverable
______

Total G.S.T. Payable
Deferred Grant Revenue
Deferred Revenue
Due to Affiliates 0.00
____________

TOTAL CURRENT LIABILITIES_________

____________

TOTAL LIABILITIES _________

EQUITY
FUND BALANCE

Operating Fund Balance
Capital Fund Balance
Current Surplus (Deficit) -
____________


TOTAL FUND BALANCE ____________

____________

TOTAL EQUITY _______________
____________

LIABILITIES AND EQUITY ________________

 

Is the Budget Realistic?

Once the balance sheet indicates the overall financial health of the association at a specific point in time, the Treasurer can begin thinking about the development of the operating budget for the next fiscal year. Once developed, this budget is taken to the board for approval.

As Treasurer, where do you start when trying to develop a realistic budget? Begin by taking a look at the previous year's budget. What did the association actually spend? What do you know about inflation and other factors that will affect the coming year's budget? Does the budget make sense?

It is important to develop a budget with which you can live. The budget you develop will determine for example, the salaries you pay. If you overestimate your income and/or underestimate your expenses, you could be saddling the association and the Board members with debt.

The following chart provides you with a sample budget. Because it is last year's budget, both the original amounts budgeted and the actual amounts spent are included. With this sample, you can get a sense of what needs to be taken into consideration when you develop a budget.

 

Budget & Actual Report - Sample

Not available -- data in tables needs to be converted

  Budget Actual
INCOME    
Operating grant ? $80,000
Project grant $134,000 $134,000
Memberships    
Donations    
Endowment fund    
etc    
Total Income    
EXPENSES    
Salary & Benefits    
Office Rental    
Telephone, toll free line, fax, cell phone, Internet    
Office supplies, Postage, courier etc    
Photocopier    
Director's Liability Insurance    
Professional Fees - Bookkeeper
   
Professional Fees - Auditor    
Travel & Conferences    
Board Communication    
Board Travel & Conferences    
Commitee Communication    
Total Expenses    
   
SURPLUS (DEFICIT)    

 

 

Report on Year's Budget (Y.T.D. minus B.T.D. = Variance)

Below is an example of how the Treasurer would report on the current year's budget. As Treasurer, you should produce regular statements which show the annual budget, the budget-to-date, the year-to-date actual, and the variance. This will tell you and the Board how you are doing so far this year.

The following points may help you. The variance is achieved by the following formula:

Y.T.D. - B.T.D. = Variance

The Surplus (Deficit) is calculated by taking the total income and subtracting the total expenses.

June 30, 2003

  Budget B.T.D. Y.T.D. Variance
INCOME        
Operating grant        
Project grant        
Memberships        
Donations        
Endowment fund        
etc        
Total Income        
EXPENSES        
Salary & Benefits        
Office Rental        
Telephone, toll free line, fax, cell phone, Internet        
Office supplies, Postage, courier etc        
Photocopier        
Director's Liability Insurance        
Professional Fees - Bookkeeper
       
Professional Fees - Auditor        
Travel & Conferences        
Board Communication        
Board Travel & Conferences        
Commitee Communication        
Total Expenses        
       
SURPLUS (DEFICIT)        

 

Using Past Budgets for developing Proposed Budget

If in the previous example, half way through the year, the association had a deficit, the Treasurer would need to ask whether there is an expectation that this will be reduced over the remainder of the year (and why) or, if not, what can be done to keep it from increasing. At the same time, she should be asking whether the proposed budget for the next year is realistic when compared to how this year is going.

The Treasurer compares these budgets with the proposed budget for the following year and poses key questions for the board and staff to consider.

 

ITEM
2004 Draft Questions

INCOME

Operating Grant
$80,000
The feds are cutting back in spending. What project funding can be explore to suppliment our operating expenses?

EXPENSES

Salary & Benefits
#######
Salaries have not been increased in several years. We should budget for a 10% increase.

Office Communication
######
You overspent in this area in both 2001 and in this year. Are you budgeting a sufficient amount?

 

Monthly Financial Statements

The Board should receive detailed financial statements on a regular basis, usually quarterly. At the monthly Board meeting, however, the Board usually wants a quick overview of how the association is doing financially. A written version of the Treasurer's monthly oral report to the Board should be included as a section of the minutes and should be circulated to all Board members prior to the meeting.

Monthly financial statements should be presented showing the current cash position and the performance of the association as compared to the approved budget. To simplify matters, many Treasurers use a standard form for their reports which include the appropriate numbers each month. The chart on the next page is an example of this type of form.

On a standard form for the Treasurer's report, two different areas are taken into account.

First, the overall financial picture must be considered. Most associations begin the year with some money in the bank. A picture that just shows the current year's financial activities, therefore, without indicating overall resources, can be misleading.

The first four boxes on the following chart show where the association should be according to the budget, where it actually is, and the difference between the two. Also, any known financial commitments (e.g. insurance premiums paid once a year) should be itemized since they affect the budget. Even though these financial commitments are for the future, the Board cannot accurately gauge the financial situation of the association unless upcoming debts are acknowledged. Appropriate provision for these commitments needs to be made.

The lower boxes, together with the upper boxes, give the Board a good picture of the finances of the association and make for good planning.

Consequently, this form makes the Treasurer's reporting easier.


Sample Treasurer's Report

SAMPLE TREASURER'S REPORT

Treasurer's Report for the Month of: _____________________________

Cash on hand at the beginning of the month

Income for the month

Expenses for the month

Cash on hand

Budget to date

Actual to date

Difference

Financial Commitments


_______________

_______________

_______________

_______________

_______________

_______________

_______________

 

 

Glossary of Financial Terms


Appropriation: A transfer of net income or equity to a special account or fund, generally to restrict its availability for distribution.

Assets: Monetary or non-monetary items that represent probable future economic benefits controlled by the association.

Balance Sheet: A statement of financial position showing the assets, liabilities, and equity of an association at a point in time.

Budget: A detailed estimate of an association's fiscal plan of action for the next year.

Capital Assets: This term refers to buildings, equipment, etc. which are not consumed or used up in the normal operating process.

Capital Budget: A fiscal plan for the proposed additions to capital assets and their financing.

Cash Accounting: A method of accounting for transactions whereby the transaction is recorded when cash is received or spent.

Chart of Accounts: A list of all accounts in the General ledger with their assigned account number.

Depreciation: An accounting concept which allocates the cost of a fixed asset as an expense over the expected useful life of the asset.

Donations-in-Kind: Gifts in the form of donated goods or services to a non-profit association.

Endowment Fund: Restricted funds from which only the income (e.g. interest) from investing the principal may be spent.

Expenses: Outflows of resources arising from the operation of the association during a period.

Financial Statements: Normally comprising a balance sheet, a statement of revenue and expenses, a statement of changes in financial position, and accompanying notes.

Fixed Costs: Costs which do not fluctuate with volume.

General Ledger: A record of the summarized transactions from all other accounting journals. The balances in this ledger are summarized and grouped to prepare the financial statements. This ledger contains the complete financial history of the association.

Non-Current Assets: Assets which are held for a term greater than a year. Examples include land, buildings, and equipment.

Operating Fund: Consists of unrestricted contributions and day-to-day operating revenues and expenses of the association.

Pledges: Promises to donate funds at a future date(s) to a non-profit association.

Reconcile: To reconcile is to account for the difference between two related records (e.g. account for the difference between the month-end balance on the bank statement and the month-end balance in the accounting records or books of account.

Revenues: Revenues include: income from the sale of goods and services (after deduction of returns, allowances and discounts); gains from sale or exchange of assets; interest and dividends earned on investments; and donations and grants.

 

 



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