The Modern Treasurer
Over the past few weeks, more than one director or CEO has asked me the question, “Are Treasurers on the board a thing of the past?”
The short answer is, “No.”
Critical is to understand is that the role of Treasurer has changed dramatically since 2001, and keeps evolving. If your board has not revisited their Role of the Treasurer policy since 2011, then it is time for an urgent review.
In general, Treasurers have financial oversight of the organisation ensuring that record-keeping and accounts meet certain conditions, compliance with relevant legislation and that appropriate financial systems and controls are in place. How the role is actually performed and the behaviours required of the Treasurer is unique in every organisation and dependant on a range of factors such as size, staff, business complexity and skill of the Treasurer.
Let’s consider some of these factors;
Authority and Delegations
The first aspect to understand about the role of the treasurer is that they are first and foremost a member of the Board. This means that the person in the role has no special decision making powers or special access to staff unless these powers have been specifically delegated by the board.
Specifically delegated means it needs to be in writing with board approval; I would recommended that these delegations are revisited annually as part of your board’s policy review session or whenever a new Treasurer takes office. Without clear statements of the authority of the position and delegations to the position by the board, you’re going to be in a world of pain when things (and people) don’t operate to plan.
The Treasurer should not be allowed to undermine the CEO and instruct staff to access information except where a pre-approved ‘snap audit’ occurs. The Treasurer should not be allowed to demand records outside of the board meeting or their delegated remit.
Having a Treasurer with well-written policy and outcomes to support the position reduces risk, but doesn’t eradicate it. All board members share accountability. Non-financially trained Board members often leave all responsibility for finances to the Treasurer, preferring not to try to figure out what all the numbers mean. Whilst leading the Board is an important task, having a Treasurer does not allow other board members to abdicate their fiduciary responsibilities to the organisation and the Treasurer should not be expected to shoulder the burden alone.
The position of Treasurer is often stipulated in the constitution of non-profit organisations. There may be some description about the role in the constitution differentiating it from the role of the Chair or role of the Secretary.
It doesn’t matter what a consultant may tell you, to remove the role of the Treasurer comes down to the members’ decision. A better tact is for the Board to define what that role is and describe the role in board policy. Board policy is determined by the board.
To begin defining the role of Treasurer for your organisation, firstly consider the type of organisation you have; its structure and its complexity. This is why each Treasurer role is unique; every organisation is somewhere along the continuum of complexity and size but rarely are two organisations exactly the same.
This is why we can’t just pop out a one-size-fits-all Role of the Treasurer. It’s not the top-line functions of the role that is difficult to determine (you can use Google for that) but the different delegations, authority, relationships and specific outcomes relative to strategy, monitoring and performance evaluation that takes time to understand and define.
For a large organisation, the Treasurer could operate purely from a strategic level. Large organisations often employ a Chief Financial Officer (CFO), accounting staff and support staff. These staff have access to a large range of data and with the ability to generate quality reports. Large organisations may have a number of diverse businesses and sites and also have large accounting firms assisting their budgeting and other financial management processes.
As the Chair is to the CEO, the Treasurer is to the CFO.
Here are some suggestions on how the Treasurer can make a significant governance impact in a large organisation.
Sub-committees: The Treasurer may take on the responsibility of chairing financial sub-committees, such as the Audit and Finance Committee. At this level the Board may prescribe decision making powers in board policy so many of the business-as-usual approvals that often clog board meetings can be approved, leaving more time in board meetings for strategic and risk discussions.
Strategic position: With the right Financial Governance policy in place, the Treasurer can be a critical in the board’s understanding of the financial position of the organisation as it stands at a point in time and for preparing and supporting strategies for the financial position of the future.
Working with the CFO, the Treasurer may have skills that allow them to interpret the strategic position of the organisation from a financial perspective, remembering that the budget is a financial expression of the strategic plan. It is vital that the board hear one of their own voices in strategic discussions and decision making other than just from a management perspective. It helps build trust between board and management when mutual confidence in what is being presented increases.
Reporting in the Board Meeting: The Treasurer may have specific skills and competencies in Financial Governance allowing them to understand what reports the board need to make good decisions and working with the CFO to create the reports. The beauty of management reports, as directors will remember from their mandatory training, is that reports detailing almost anything can be created depending on your system’s capacity to capture and filter data and your board and management’s capability in interpreting data.
Important is that the board need to tell the CFO what reports they would like. Here is where the Treasurer’s skills in communicating with the CFO and translating the board’s ideas and needs into appropriate financial presentations are vital. I often hear directors complain that the financial reporting is tedious and they would prefer a dashboard or set of key performance indicators that tells them at a glance how the organisation is doing on critical measures. The Treasurer can work with the Board on determining what those critical measures are, then provide commentary when questions are asked.
Combining good financial reports that are linked to strategy with clear and agreed measures would be a key outcome for a successful Treasurer.
Management recommendations: The Treasurer may review financial forecasts in For Decision papers with the CFO to understand methodologies behind management recommendations. Too often I see no financial forecasts or poorly presented data that leads to poor decision making in board meetings.
Management may not have the skills to understand what kind of financial data the board needs. The Treasurer forms a bridge of understanding and can set standards before poor reports leading to poor discussions clog up the board meeting.
At the other end of the scale, you may have a small organisation with one site and a straightforward business model. Here the Treasurer may take a hands-on role in financial oversight. It is not good business practice for one person to have sole control and oversight of the organisation’s finances.
It is essential that the Treasurer ensures that effective financial systems and procedures are in place, are being consistently followed and are in line with best practice and legal requirements. The Treasurer should meet with the General Manager 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. The Treasurer may also meet with the organisation’s accountant and/or auditor to prepare statutory and other board reports.
In a small organisation, 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 organisation, and by analysing the current budget and comparing it to the last budget, the Treasurer, along with the General Manager and/or auditor, should be able to develop a budget that can satisfy the needs of the organisation while being fiscally responsible.
Other functions of the Treasurer are to ensure the Board's financial policies are being followed, prepare reports for the board meeting, prepare reporting forms for funding bodies or government bodies, maintains the bank accounts, oversees financial transactions and sign the cheques (with a second signature from any of the board's other directors or staff with signing authority).
I would recommend that no matter the size of your organisation, a fundamental audit list is prepared in advance that may be checked at any moment with board pre-approval.
For example, it is difficult for a CEO to operate with what I call ‘micro-governing’. That is a Treasurer (or other board member) constantly checking on every little detail within the organisation. Like ‘micro-management’, micro-governing is a governing style whereby a board member closely observes or controls the work of the CEO with generally negative connotations.
Instead, perform a random check on payroll (for phantom employees), cash stocktake, phantom invoices or cash flow analysis. Detailing the requirements for snap-audits in these areas upfront, and alerting the CEO that they could happen ‘any time’ will mean that the Treasurer does not have to constantly review performance feedback and focus excessively on detail. Instead, the Treasurer can focus on overall strategic performance and improving the capacity for good decision making at the board table.
Skills and Competencies
The Treasurer's role can be difficult because of its technical nature. As a bare minimum, I would suggest the Treasurer must attend face-to-face financial training through a reputable trainer (not just industry seminars!) at least once a year.
Ultimately, the board need to sit down and discuss what they’re looking for in an ideal Treasurer and what the role will encompass.