What Financial Matters should be included in the Board Minutes?

What Financial Matters should be included in the Board Minutes?

Question-I am new to the board of directors and I have been elected secretary. I am in charge of taking the minutes for the board of directors meetings. I have been secretary of several organizations in the past and feel comfortable with taking minutes, but have been told that there are financial matters of the association which need to be recorded. What specifically do you look for when you are reading an association’s minutes during the audit process?
Answer-Here is a brief review of the key financial areas that we look for when reading the minutes during an audit and brief comments as to why it is important to the audit process.

  1. Opening and Closing Bank Accounts.
    The board should be making the decision as to where to place the association’s investments and where to have their checking accounts.
  2. Approval of Major Contracts.
    The board should approve major contracts and document such approval in the board meeting minutes. The board should have a policy as to when to go out to bid -e.g. over a certain dollar amount, after “x” number of years with a vendor, etc. The bid process is a good internal control procedure and when used it should be documented in the minutes, also.
  3. Approval of Reserve Expenditures.
    Reserve monies are set aside for specific purposes and there can be much judgment involved as to whether an expense is a legitimate reserve expense. Additionally, generally reserve expenditures are for larger dollar amount expenses and may require considerable research to determine the best vendor. The minutes should record approval of the expenses (not just that it was discussed or that it occurred), then the vendor and dollar amount should be noted. We also suggest that the reserve category to be charged be documented. This approval process provides an audit trail so that the auditor can verify that the amount expended agrees with what the board approved. Additionally, the auditor compares the expenditure with the reserve study to determine if the reserve expense appears reasonable as compared with the study.
  4. Collection Actions.
    It is the board’s responsibility to ensure that the delinquent receivable accounts are collected in a timely manner and that the collection policy is uniformly enforced.
  5. Review of Income Statement Variance Reports.
    The board should be reviewing the budget-to-actual profit and loss statements and asking questions about any variances. When it is determined why a particular line item is significantly over or under budget, that reason should be recorded in the board meeting minutes. In this way, the auditor (as well as the membership of the association) knows that the board is aware of the financial status of the association. Also, this record is the permanent “memory” for the association if a question should later arise.
  6. Approval of Budget Including Assessment Amount.
    The board should responsibly set the budget and assessment amount for the upcoming year.

These are the main financial items that we look for when reading the minutes during our audit process. Of course, any financial matters that the board discusses could be included in the minutes. However, I do not find any relevance for reading off portions of the financial statements into the minutes, such as cash balances or balance sheet account balances. By approving the financial statements, these amounts would be available off the original documents. Unless the list of account balances includes action items, I do not believe this to be the best use of time. I would prefer that the board concentrate on the financial issues which make a difference to the association and record their decisions on those items.