Committees are formed to help boards and managers with a burdensome workload. In theory, condos/HOAs could have a committee for social activities, rule enforcement, architectural requests, or any other recurring responsibility that requires time and resources.

A finance committee is similar to other committees. However, members of this group are given a great deal of trust (and work). There is pressure on this group of volunteers to get things right the first time. A small numerical mistake could create big budget problems for a condo or HOA. But a competent financial committee can be instrumental in providing clear financial oversight to a board and help strengthen the community’s long-term financial health.

Table of contents

• Why are finance committees formed?
• Main objectives
• Responsibilities
• Will a finance committee benefit your community?
• Set your committee up for success

Why are finance committees formed?

Assisting the board

A finance committee can significantly lighten the workload for board members, especially the treasurer, as well as management. Ideally, there will be an accountant or bookkeeper who knows what they are doing on the finance committee.

Regulatory oversight

This team also helps ensure finances are being managed according to local laws and condo/HOA standards. Rather than giving complete control of the association’s finances to just one group of people, the committee performs checks and balances to prevent financial problems like overspending, discrepancies, or misappropriation of funds.

Cost-savings

Small to mid-sized communities that cannot afford to hire a property management company may find that having a finance committee is the best solution for them. Committee members, like directors, are volunteers and do not get paid for their work. However, it can be even costlier to recuperate from mistakes made by an inexperienced committee. In these situations, the board needs to ensure that there is someone who has professional finance experience on the committee. Otherwise, it probably makes more financial sense to hire an accountant that has worked with condos/HOAs before.

Main objectives

Generally speaking, a finance committee is expected to:

• Assist with building and managing the operating budget
• Establish financial goals that will benefit the community as a whole
• Create a plan to reach financial goals
• Present work/report to the board of directors
• Understand and abide by rules and laws that govern non-profit financial management 

Keep in mind that it is still up to the board to manage the community’s finances, as they have accepted the fiduciary duty to care for the community.

an effective committee must have structure and a directive. The board is encouraged to guide and work with the finance committee instead of leaving the volunteers to figure things out for themselves. Educate members about what they can and cannot do, and when they should seek help from the board.    

Responsibilities

This list of responsibilities is not necessarily standard or comprehensive. However, it can provide you with some realistic ideas of what finance committees do.

Preparing the annual budget

This is probably one of the more significant tasks presented to the committee. Creating an annual budget is a very tedious and time-consuming process that involves a lot of care and attention to detail.

The annual budget will contain a line-by-line breakdown of expenses and revenue, and other key numbers that will be shared with the entire community. As such, it’s helpful to have a committee that is comfortable sharing this responsibility.

Maintaining financial records

The finance committee often performs accounting and bookkeeping duties. Members keep track of the money coming in and out of the condo’s/HOA’s bank accounts.

They review and monitor financial statements, bank reconciliations, insurance policies, reserves, and investments to ensure the numbers are correct and align with the budget.

Building reports

Clear reports make it easy for the board to understand where the community stands from a financial point of view. They can request an overview of monthly expenses and revenue, or something more granular like costs that went over budget.

The finance committee is also responsible for redacting confidential information from these statements if owners might ask to review them.

Committee members would benefit from having an online system that simplifies some or all aspects of financial management. A reporting tool really comes in handy because it crunches all of the numbers in mere minutes and produces standardized reports that are attractive and professional.    

Will a finance committee benefit your community?

Although the board of directors carries the fiduciary responsibility for a condo or HOA, the finance committee can provide some much-needed support. In many cases, the committee can offer measurable benefits to the community provided that volunteers are prepared to work and follow rules/processes. If you don’t have people with some financial experience, or who are interested in volunteering their time, then the answer is probably no.

Each community will need to evaluate the pros and cons of forming a finance committee because not every condo or HOA will want or need a committee for financial management. 

Set your committee up for success

As mentioned before, a strong committee can make life easier for board members, and help elevate the community’s well being too. However, the success of any committee will depend on, at least in part, how well the board can guide and support this group of volunteers.

In order for a finance committee to be successful, the board must:

• Create a clear job description for all committee members. This ensures that every person knows what tasks they are responsible for. Job descriptions should be detailed to prevent misunderstandings and minimize problems between boards, committees, and owners
• Verify that the committee has all of the information and resources it needs to be effective. For example, the committee should have access to and be familiar with accounting standards that are applicable to the community. Deadlines for taxes, budgets, meetings, and other items are also very important
• If there are people that have never served on a committee before, offer tips or ideas on how to streamline and simplify processes, work collaboratively, and be as productive as possible
•  Make sure committee members know who to reach, and how to reach them if a problem arises
• Thank your committee members. Don’t take their hard work for granted or you might lose them

Conclusion

A knowledgeable finance committee can be an invaluable asset to a board. It can assist with strengthening finances and provide recommendations to help the community reach its financial goals. Finance committees can also help ensure finances are being managed correctly. However, there must be a team of people willing to volunteer their time and resources to the condo or HOA in order for the committee to be successful. If the team is too inexperienced or disinterested, it may end up creating even more problems for the board.