Treasurers Roles & Responsibilities
The Treasurer
The Treasurer is the lay ‘Financial Controller’ on behalf of the Board. The day to day tasks performed by a credit union Treasurer will vary according to the size and operational requirements of the credit union but responsibilities remain the same.
Key Responsibilities
- To ensure that all financial transactions made to or from the credit union’s bank account are recorded properly and compliantly.
- To ensure that all monies received are reconciled to the credit union’s bank account.
- To ensure that the credit union’s financial accounts accurately reflect its financial position.
- To work with accountants and auditors to ensure that the financial accounts comply with all statutory and regulatory requirements.
- To report the financial position of the credit union to the Board on a regular basis.
- To advise the Board and management on financial matters, including investment decisions.
- To ensure the safekeeping and security of all monies.
- To prepare and monitor the annual budget according to the business plans agreed by the Board.
- To account for and manage bad debt.
- To maintain a cash flow to enable the credit union to operate efficiently.
- To ensure that the Annual Return (CY) and Quarterly Returns (CQ) are completed.
By its nature the role of Treasurer is a responsible one. However, the Board collectively retains responsibility for ensuring the assets of the credit union are protected.
Attributes
- Commitment to the credit union
- Willingness to devote the necessary time and effort
- Strategic vision
- Good independent judgement
- Able to think creatively
- Willingness to speak their mind
- Ability to work effectively as a member of a team
- Financial qualifications and experience
- Some experience of third sector finance
- The skills to analyse proposals and examine their financial consequences
- Preparedness to make unpopular recommendations to the Board
- Willingness to be available to staff for advice and enquires on an ad hoc basis
The finance function is undertaken by staff. This does not lessen in any way the responsibilities of the Treasurer and the Board; it is essential that the Treasurer is consulted on policies and procedures and communicates with employees. It is equally important that a clear division of duties is agreed, recorded and communicated to all concerned.
Reporting to the Board
The Treasurer acts on behalf of the Board, which in turn often relies heavily on his/her financial expertise. The Treasurer should work closely with the Manager in developing financial reports to the Board in order to keep them up to date on the financial position of the credit union.
It is the responsibility of the Board to review the financial position of the credit union at its monthly meetings. Whilst the Treasurer may have the specific responsibility for the system of accounting and for producing the financial reports, it is the collective responsibility of the Board to understand what is being provided, to challenge it if necessary and to use the information to direct the operation of the credit union.
The financial reports to be provided should include:
- The balance sheet at the end of the previous month based on provision in accordance with the PRA/FCA requirements
- The revenue account for the previous month and for the financial year to the end of the previous month, showing the performance against the budget (first year of the business plan)
- A summary loans report showing the number and value of all loans, whether in timely repayment or not, the extent of any delinquency and the loan provision for each
- A set of management charts showing how the credit union is progressing against the various plans and budgets is of particular value. Not only do they provide a quicker understanding of business performance than a series of numbers but it is easier to see when management action is required.
Financial Control
Among a Treasurer’s responsibilities are to ensure, on behalf of the Board, that all financial transactions are recorded accurately and to ensure members’ funds are safe. In order to achieve this, the Treasurer must ensure that a range of policies and procedures are in place to ensure effective financial control.
Whether the credit union is run entirely by volunteers or employs a manger and staff it is not good practice for all tasks associated with the finance function to be performed by one person, without supervision from others. For this reason, the credit union has a process of segregation of duties of financial transactions.
Induction and Training
The Treasurer should be provided with an induction plan that enables him/her to gain an understanding of the specific responsibilities and develop the confidence and authority to carry out the role of Treasurer.
Specifically the induction should include:
- Main responsibilities
- Face to face meetings with key staff
- Duties as Treasurer
- Meeting with former Treasurer
- Ongoing issues
- Update on business issues
- Regulatory and legal responsibilities
- Credit Union rules
- Skills audit and ongoing training plan to include:
- Credit union regulation
- Accounting and Bookkeeping skills
- Financial Planning
- Regulatory and legal skills
On taking up his/her duties the Treasurer should have access to:
- Credit Union Governing Documents
- Business and Strategic Plan
- Code of Conduct/Behavioural Standards
- Organisational tree of committees and of staff structure
- PRA Rulebook and other regulatory guidelines
Approved Persons’ Status
The Treasurer has no additional Approved Persons’ Statues other than being listed on the FCA Directory Persons as a Director.
Financial Planning and Control
All credit unions are required by PRA/FCA to have a rolling 3 year Business Plan
This describes the manner in which it is intended to develop the credit union over the next 3 years, on a year by year basis. It is in preparing this document that the objective setting and planning stages are carried out. The annual update of the business plan should involve all directors.
- A well thought out business plan will be an essential tool to enable you to develop and manage the growth of your credit union
- A business plan should be regularly reviewed and revised. Make it a regular item for the Board of Directors’ meeting
- There are a number of key measures that indicated the likely success of the credit union. These include number of members, retrained shares and total assets.
- View your business plan as targets which must be met if the credit union is to become sustainable.
To plan effectively the Board must have access to the data. Each month the Board should be able to examine the financial statement; this should give a picture of the month’s activity measured against previous months and previous years. It should include balance sheet, profit and loss account, cash follow, ratios & trends, share and loan information, delinquency rates, membership figures
The statement should sow projections and actual figures.
The credit union year end is 30 September.
Authorisation
It is in the interests of neither the credit union nor the Treasurer for all responsibilities for receipt and payment of monies to be in the hands of one person. A credit union Board of Directors has collective responsibility for the credit union’s health and this should be reflected in a sensible division of duties.
No individual should be able to both authorise and make a payment. There should be Authorisation Procedures in place to segregate the authorisation of a payment form the actual payment.
Likewise, every sum received by the credit union should pass through another officer’s hands before reaching the Treasurer.
The credit union should take particular care when designating signatories to accounts. Segregation of individuals that have some form of relationship is important in maintaining transparency.
Recording Transactions
One of the Treasurer’s prime responsibilities is to ensure that accurate records of all financial transactions are kept. Ideally, (s) he should not actually process the transactions but should ensure robust procedures are in place for those who do so.
Transactions might include:
- Crediting share deposits to members accounts
- Debiting share withdrawals from members accounts
- Adding loans granted to members loan accounts
- Reducing member’s loan balances by loans repayment
- Recording all interest received from members in the credit union’s income account
- Recording any other income such as bank interest, membership fees etc.
- Recording payment of any bills e.g. postage, electricity etc.
- Recording purchases made from petty cash
The credit union operates computerised accounting system that forms a major part of the credit union’s financial records. The data is backed up onto a cloud based system.
Even with storage in the cloud, it is never recommended that Caledonian CU should rely solely on its computer system. Caledonian CU is required by the regulator to have a business continuity plan in place. This includes the need to keep back-ups in secure locations off-site.
Another major consideration is the need to verify the correctness of every financial record. This is, basically, achieved by “balancing” one set of records to another. This introduces the requirement to retain a variety of different financial records that, when pooled together form an accurate record of all the credit union’s financial transactions.
Financial Statements
The Treasurer is responsible for overseeing the production of the statutory financial statements on behalf of the Board and in conjunction with employees, the accountant and the auditor
The Balance Sheet
The Balance sheet provides a record of the ASSETS and LIABILITIES of the credit union. Assets will consist mainly of loans made to members, bank deposits and cash in hand or in the bank. Liabilities will include the shareholdings and deposits of members, reserves and dividends payable. Only one Balance Sheet is prepared, since it shows the position of the credit union at a point in time which is usually the year end.
The Revenue Account
The Revenue Account lists expense account and income account items. Monthly and cumulative figures are also needed for this account which determines whether income exceeds expenditure in the relevant period, i.e. month, quarter or year.
Quarterly Returns (CQ) and Annual Returns (CY)
The Board of Directors must file financial returns to the Regulator on a quarterly and an annual basis. Failure to file the returns may lead to financial penalties or supervisory notices being imposed on the credit union. The Quarterly Return (CQ) is to be completed as at end of March, end June, end September and end December. The Annual Return (CY) must be completed at the end of the financial year and filed by end of April of the following year. Guidance on completing returns is available from the PRA website www. bankofengland.co.uk
The Annual Return is completed by the auditor but it is the Board’s responsibility to check and ensure that they have been completed correctly. This role is the duty of the Treasurer.
Required Ratios and Prudential Limits
The ratio requirements for credit unions are outlined in the PRA Rulebook. The PRA have set minimum prudential limits that have to be met by credit unions. However, if the credit union only aims to achieve the minimum, it is likely that there will regularly be a risk of breaching compliance with the rules. It is recommended that a ‘cushion of comfort’ is aimed for which safely exceeds the minimum requirements of the PRA/FCA. This will help the credit union to safely manage its compliance with the rules. The limits required include:
Liquidity Ratios
Managing the credit union’s finances is not only about ensuring adequate surplus. The Board also has to ensure that it meets liquidity requirements. Liquidity refers to the amount of money readily available to the credit union.
Solvency
It is a PRA/FCA requirement that a credit union remains solvent at all times.
Bad Debt Provisions
Balance sheets recognise that not all loans owed to the credit union will be repaid in full. Therefore the value of loans outstanding should be reduced to reflect this. This is known as provisioning because nobody knows which particular loans will ultimately become bad debts; the PRA/FCA has specified minimum provisions.
Capital Requirements
Capital is the total of general reserves, other reserves and subordinated debt. The ratio of capital to total assets is called the Capital Ratio. The capital of a credit union imposes limits on what it may lend.
THE TREASURER
A Checklist
- The Treasurer of a credit union oversees financial control within the credit union collectively with the Board.
- The day to day tasks performed by a credit union Treasurer will vary according to size and operational requirements of the credit union but responsibilities remain the same
- All credit unions are required by regulators to have a rolling 3 year Business Plan. This describes the manner in which it is intended to develop the credit union over the next 3 years on a year by year basis.
- One of the Treasurer’s prime responsibilities is to keep accurate records of all financial transactions.
- The Treasurer is responsible for overseeing the production of the statutory financial statements on behalf of the Board and in conjunction with employees, the accountant and the auditor
- The PRA/FCA have set minimum prudential limits that have to be met by all credit unions.