COMMON INTEREST COMMUNITY STANDARDS COUNCIL
Quick Reference QR-S3 — Five Questions Every Board Member Asks the Treasurer
Series: Board Member Essentials
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THE TWO FOUNDATIONAL EQUATIONS
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  Balance Sheet:    Assets = Liabilities + Equity
                    Snapshot -- true on one day

  Income Statement: Revenue - Expenses = Net Income
                    Covers a period; resets at year-end

Net income flows into equity. If they don't reconcile, the books are
wrong.


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THE FIVE MONTHLY QUESTIONS
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Ask these at every board meeting -- every month, without exception.

QUESTION 1 -- Aged Receivables

"What is aged AR as a percentage of annual budget? What is the trend
over the last three months?"

  3% or less   Excellent -- disciplined collection
  4-5%         Good -- watch trend
  6-10%        Poor -- cash-flow strain likely
  Over 10%     Distress -- immediate action required

QUESTION 2 -- Reserve Fund

"What is the reserve fund balance as a percentage of the fully-funded
balance from the reserve study?"

  CICSC minimum benchmark: 70% funded (revised Q2 2026)
  Get a reserve study update if yours is more than 5 years old

QUESTION 3 -- Budget Variance

"What is the largest year-to-date variance from budget, and what
explains it?"

  Variances over 5% on any major line item require explanation.

QUESTION 4 -- Bank Reconciliations

"Were all bank accounts reconciled this month? Was the reconciliation
reviewed by someone other than the preparer?"

  Reconciliation must be done -- and independently reviewed --
  monthly.

QUESTION 5 -- Unrecorded Liabilities

"Are there any unrecorded vendor invoices or known-but-unrecorded
accruals?"

  Hidden liabilities distort the financial picture. Surface them
  monthly.


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WHEN THE ANSWERS ARE VAGUE -- PUSH BACK
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  Vague: "Receivables are fine."
  Push back: "What's the percentage? What was it last month? Three
             months ago? Is the trend rising?"

  Vague: "We're funding reserves."
  Push back: "Funding at what level vs. the reserve study? When was
             the last study? Are we below the recommendation?"

  Vague: "Everything reconciles."
  Push back: "Were reconciliations signed by a reviewer? Any items
             older than 90 days? Any unusual entries?"


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THE TWO ASSOCIATION FUNDS -- NEVER MIX THEM
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  OPERATING FUND
  Purpose:      Day-to-day expenses
  Bank account: Separate

  RESERVE FUND
  Purpose:      Long-term component replacement
  Bank account: Separate

Money moving between them is a transfer -- not revenue or expense.
Mixing them is a financial-control failure.


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RESERVE FUND HEALTH -- ONE-PAGE DIAGNOSTIC
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  1. Get the reserve study (or ask when it was last updated)
  2. Locate the Fully Funded Balance (FFB)
  3. Divide current reserve balance by FFB -- that is your funding
     ratio
  4. Compare to the 70% CICSC benchmark
  5. Compare actual annual contribution to the study's recommendation
  6. If you are below the recommendation: ask the board for a written
     catch-up plan


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This card is an educational summary. It does not constitute financial
advice.

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