Finance
FINANCE COMMITTEE CHARTER
Board Approved Revision IV – March 25, 2021
I. PURPOSE
This charter establishes a framework for the Lake Sherwood Estates Association (LSEA) Finance Committee (FC) to accomplish its purpose.
The FC’s primary purpose is to provide prudent financial management support to the LSEA Board of Directors (“the Board”), Treasurer, and Association Manager that will: (1) help safeguard members against personal financial risks related to LSEA financial management practices; (2) provide a sound business-financial structure that is expected to enhance members’ property values over time; (3) promote sound financial operations accordance with (IAW) requirements and principles expressed in LSEA’s Declaration of Restrictions (“the Restrictions”), Community Association Institute (CAI) guidelines, National Reserve Study Standards (NRSS), American Institute of Certified Public Accountants (AICPA) Common Interest Realty Associations (CIRA) standards, and Generally Accepted Accounting Principles (GAAP); and (4) identify and monitor execution of budget requirements that will maintain or improve LSEA’s financial strength for current-year operations and for sustained future-year operations in IAW community goals and objectives as expressed by Board-approved annual budgets and Board-approved Long Range Planning (LRP) documents.
A critically important secondary FC purpose is to engage and inform a broad cross-section of Association members regarding LSEA’s financial position. This goal is accomplished by virtue of standing committee chairpersons, or their designated representative, fully engaged as FC voting members; by proactive two-way FC financial communications between committee chairs, or designated representatives, and their standing committee members; and by virtual that all FC meetings shall be open to all LSEA members in good standing with FC meeting minutes published on the LSEA website.
II. MEMBERSHIP
A. CORE MEMBERS (Voting): The FC’s Core membership shall consist of LSEA’s standing committee chairpersons (does not include ad hoc committees), the LSEA Treasurer, and Assistant Treasurer if one is appointed by the Treasurer and approved by the Board. Committee chairpersons may designate an alternate from within their committee to represent and speak for them at FC meetings with full voting privileges. The LSEA Treasurer serves as the FC chairperson. The Assistant Treasurer, if appointed, may act in the FC chairperson role at the request of the Treasurer.
B. FC BUSINESS-FINANCIAL SUPPORT MEMBERS (Voting): LSEA members in good standing may volunteer for FC business-financial support member positions (a.k.a., “Members at Large”). Support members serve one-year voting terms January-to-December (one full budget cycle). They are selected primarily based on business analytics, accounting, financial management, insurance, or other business-financial related technical expertise. Business-financial support members provide the FC with a sound business-financial perspective. They help ensure financial data accuracy and consistency IAW governing Restrictions, CAI, NRSS, AICPA/CIRA, and GAAP criteria. They also serve as core members on the Financial Focus Group described below.
Candidates for FC business-financial support members submit their resume or letter of relevant experience to the Administration Manager on or before the same deadline established for LSEA members to apply for a Board member position (typically first Monday in August) prior to their one-year January-to-December FC voting term. The FC shall select up to three candidates for FC business-financial support members by consensus or vote at the first FC meeting after the Board passes the annual budget (typically in October), but NLT the November FC meeting. Resumes/letters of those selected are submitted for Board approval at the first available Board meeting. Resumes/letters of those selected are submitted for Board approval at the first available Board meeting. If a vacancy exists after FC selections are made (i.e., if less than three business-financial support members volunteer, are selected, or if a resignation occurs), then the LSEA Treasure may appoint a qualified candidate to fill the vacancy with Board approval. By way of FC orientation, especially to observe the final steps in LSEA’s annual budget build, business-financial support member candidates are encouraged to attend FC meetings for the duration of their election year as non-voting observers until their one-year voting term starts in January. Business-Financial Support members may not designate alternates to serve in their absence.
C. PROFESSIONAL STAFF (Non-Voting): The LSEA Association Manager, or his/her designated representative, and the LSEA Accountant are permanent FC members. The Association Manager may designate other LSEA paid employees to attend FC meetings to support specific agenda items.
D. TEMPORARY FC PARTICIPANTS (Non-Voting): FC members may sponsor other LSEA members and non-members with specific agenda-topic expertise to participate in FC meetings. These individuals may actively engage in FC discussions related to their expertise, but they shall not vote.
E. FINANCIAL CONSULTING GROUP (Non-Voting): The Financial Consulting Group (FCG) functions as LSEA’s in-house consulting resource. The FCG provides professional business-financial expertise for selected LSEA issues with financial implications. Similar to external paid professional consultants, the FCG develops arms-length professional advice (e.g., recommendations on collections return-on-investment, process internal controls effectiveness) and proposed new or improved financial products (e.g., financial documents, spreadsheets, process flow models) based on their independent analysis and professional judgment.
The LSEA Treasurer approves and manages all FCG consulting activities. The Treasurer may elect to not appoint an FCG, to engage them on a short-term task-specific basis, or to employ the FCG on multiple tasks for an enduring period of time not to exceed the appointing Treasurer’s tenure. The Treasurer responds to requests for FCG support from the Board, Association Manager, FC, or individual committees. The FCG shall not make decisions for the Board, Administration, FC, or any LSEA committee. Instead, the FCG offers professional business-financial advice and proposed products for the appropriate open meeting discussion-decision process or for decision within the Association Manager’s approved authority to assess and recommend or decide based on merit.
FCG membership is comprised of LSEA’s Treasurer, Assistant Treasure (if one is appointed), and FC business-financial support members. Other FCG members may be designated by the Treasurer for their relevant expertise on an issue-by-issue or for an ongoing basis. The FCG operates as an agile Tiger Team, often in two- or three-person small-team workgroups, to efficiently and effectively address issues and rapidly develop recommendations and/or deliver financial products.
The Treasurer must balance the often-conflicting imperatives of small-team efficiency and arms-length independence vs. stakeholder awareness and involvement in FCG deliberations that impact the stakeholders’ area of responsibility. Therefore, the Treasurer shall ensure the right stakeholders (e.g., committee chair, committee experts, LSEA Public Works Director) are included at appropriate FCG work sessions to provide stakeholder perspective whenever FCG advice, recommendations, and/or proposed products are likely impact the stakeholders’ direct area of responsibility. In the interest of transparency and financial issues awareness, the FCG shall provide timely updates at monthly FC meetings on all FCG work activities since the prior month’s update along with all planned future work activities. FCG activity updates shall be a standing FC meeting agenda discussion topic and captured in FC meeting minutes.
F. FC MEMBER SUBSTITUTIONS AND TEMPORARY PARTICIPANTS (Voting or Non-Voting): Committee chairs shall inform the FC chairperson prior to the FC meeting of their designated alternate in order for their consensus or vote to count. The Association Manager shall also notify the FC chairperson prior to the FC meetings regarding his/her designated alternate. FC member requests to sponsor a temporary FC meeting participant must be approved by the FC chairperson prior to FC meeting.
III. CONSENSUS AND VOTING PROCESS
To facilitate meeting efficiency, the FC Chair may call for a consensus to capture the FC’s position on a matter. Consensus is achieved when there is a voting quorum and all voting-eligible FC members present agree to support the group’s position even if one or more members might somewhat prefer a different position. However, even if one individual states they cannot support the group’s position, then the matter shall be decided by a formal vote.
The FC Chair calls for either a consensus or a formal vote when a motion is raised. Proxy voting is not allowed. Voting members must be physically or virtually present to participate in discussion and to cast their vote or indicate their consensus. The required quorum for consensus or vote equals fifty percent of the standing number of FC Core members and business-financial support members, plus the Treasurer and Assistant Treasurer if one is appointed. The quorum is reduced by one for each voting member who is absent for one or more consecutive FC meetings (i.e., the quorum is reduced at the start of second missed meeting). The absent member’s quorum count is restored and they may vote at the first meeting upon their return. The required quorum is also reduced by one for each FC member who is also a Board member on matters for which they are not eligible to vote. FC members who also serve on the Board shall not vote on specific LSEA budgets, spending requests, or other matters that will subsequently be subject to Board approval. However, the FC Chair, even if a Board member, may vote on any matter to break a tie vote.
IV. BUDGET FORMULATION
The Association Manager, Association Accountant, and the standing committee chairpersons have a joint responsibility to formulate the budget for LSEA’s operational cost centers within their purview. LSEA budgets are prepared IAW the Board-approved Annual Budget Preparation Procedure document. The Association Manager will present the proposed budget to the FC for discussion and vote. If there are no objections, the budget requests will be recommended to the Board as the FC position. However, each committee cost center manager (CCM) has the right of to have their respective budget requests considered by the Board whether or not the FC approves it. If there are FC objections to a CCM’s budget request, then the respective CCM has two options: (1) accept the FC suggested changes, in lieu of their committee’s budget request; or (2) the CCM can present their committee’s budget requests to the Board without modification. In the latter event, the FC will develop a position as to the pros and cons of the CCM’s budget requests for the Board to consider. The CCM’s budget request will be assembled and placed in a separate Budget Track and presented along with FC’s position to the Board for consideration.
V. FC CHECKS AND BALANCES
Actions of the FC directly impact LSEA members’ personal financial risks, including those associated with inappropriate/ineffective committee and/or department business operations and/or short-sighted financial management practices. The following checks and balances are established to provide a broad base of dedicated/knowledgeable operational business-financial management experts to help safeguard LSEA members’ personal financial exposure.
A. BROADLY REPRESENTATIVE AND KNOWLEDGEABLE VOTING MEMBERS: Standing committee chairpersons, by virtue of being elected by their committee members, de facto represent a cross-section of LSEA’s active membership population. Committee chairs bring a consensus of their committee members’ views to FC meetings. The Association Manager provides expertise on LSEA’s paid-professional operations (i.e., Administration, Security, Public Works). Additionally, the Business-Financial Support members are selected for their broad-based business related financial management experience critical for FC operations and sound LSEA business decisions. The Treasurer, Assistant Treasure if one is appointed, standing committee chairpersons, the Association Manager, and Board-approved business-financial support members provide: (1) active and knowledgeable LSEA membership representation; (2) LSEA departmental operations knowledge; and (3) business-financial management expertise, all of which are critical for LSEA’s long-term going concern success.
B. THE BOARD IS THE SOLE AUTHORITY TO APPROVE LSEA FINANCIAL MATTERS: The FC provides quality research, analysis, computations, and financial recommendations to the Board, but the FC is not authorized to decide LSEA financial matters. Only the LSEA Board has the legal authority and fiduciary responsibility to decide LSEA financial matters. These include: annual budgets, assessments, fees, operating and long-term capital spending, reserve investment decisions, insurance and legal decisions, and other decisions with direct financial implications to LSEA members. Notwithstanding FC recommendations, the Board is solely responsible to perform due diligence necessary to make reasonable informed business decisions IAW LSEA Restrictions.
C. ALL FC MEETINGS SHALL BE OPEN WITH PUBLISHED MEETING MINUTES: All FC meetings are open to all LSEA members in good standing. The FC shall post its meeting notices IAW the same requirements used for posting Board meeting notices. The FC shall promptly distribute FC meeting minutes to all Board members and to all standing committee chairpersons, and shall post them on the official LSEA web site. All LSEA members in good standing are encouraged to take their concerns for any FC action/inaction directly to the Board via mail, email, drop-off at the LSEA office, or presented at a regularly scheduled Board meeting member comment session.
VI. CURRENT PERIOD OPERATIONS
The FC: (1) monitors and compares current year financial execution with the current year budget; (2) monitors other aspects of current operations, such as accounts receivable aging and reserve investment performance; and (3) reviews adverse material trends, unfavorable variances, and financial risks for recommendations to the Board for action. The FC shall work with the Association Manager IAW Board direction to recommend reallocation and management of current funds as required for cost-effective current operations and governing criteria. The FC shall also conduct business research, perform financial analysis and oversight, and develop financial policy to support a wide range of activities and issues impacting LSEA operations. Additionally, the FC shall work with the LSEA Treasurer to develop an end of year financial health assessment for the Treasurer’s report/statement at the annual general membership meeting.
VII. SUSTAINED FUTURE OPERATIONS
The FC shall review, edit, and approve by vote or consensus a formal FC-approved version of LSEA’s annual budget. As provided in paragraph IV Budget Formulation, above, the FC-approved budget will be submitted by the Association Manager intact without change for discussion and action by the Board. The annual budget will be formulated IAW the Board-approved Annual Budget Preparation Procedure document using Budget Track or a similar budgeting or cost accounting program to identify the full cost of conducting LSEA business operations on a viable sustainable basis IAW LSEA’s governing criteria. This is vital to LSEA’s long term success as a financially healthy and desirable community. At a minimum, the FC shall ensure the following information during the annual budget build: (1) budget resources necessary to execute Board-approved LRP goals, objectives, and action plans; and (2) budget resources necessary to maintain LSEA’s projects, capital replacements, and contingency reserves at appropriate levels. Appropriate reserve levels shall be determined IAW LSEA’s governing criteria and include annual evaluation of adequacy/currency of reserve studies with annual reserve percent-funded calculated on straight-line basis. Additionally, to fully inform LSEA’s membership of potential personal financial risk stemming from inadequate reserve funding levels, reserve cost funding variances shall be clearly and effectively communicated to the LSEA membership. The FC will work with the LSEA Treasurer to develop the Board’s annual assessment letter addressing the coming year budget and LSEA’s overall financial health, to include any reserve cost funding variance.
VII. LIVING DOCUMENT
This charter shall be reviewed periodically for currency by the FC, but not less than once a year at the first FC meeting when new or re-appointed Members at Large start their term. Recommended updates to the FC Charter shall be presented to the Board for adoption. However, year-to-year accounting and financial process consistency is a widely recognized component of sound financial management. Therefore, updates to this FC Charter shall be refinements to established practices rather than sweeping or radical changes. Updates shall focus on strengthening FC processes/procedures to provide prudent and cost effective business-financial management support to the Board, Treasurer, and Association Manager.
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FC Revision I – January 26, 2012
FC Revision II – May 24, 2012
FC Revision III – October 17, 2019
FC Revision IV – March 25, 2021
The Finance Committee consists of several key committee and at-large members.
Colleen Morgan, Treasurer
Joe Wolf (ACC)
John Hamilton (Campground)
Steve Medlock (LD&M)
Bill Guinther (PMDC)
Mary Heeley (PR)
Sarah Gregory (Rec. Fac.)
Kyle McCollom (WSRC)
Cara Kyle (Youth)
John Hofman (Member at Large)
Rick Mestre (Member at Large)
Scott Morgan (Member at Large)
Dwight Luna – Professional Staff (non-voting)