How to Establish a Treasury Committee and Its Mandate

The first step is a formal governance proposal to create the committee. This proposal should define the committee's core purpose, such as capital allocation, risk management, or liquidity provisioning. It must specify the initial committee size, member qualifications, and the nomination or election process. For on-chain execution, this often involves a Snapshot vote to approve the committee's creation, followed by a transaction from a multisig or the DAO's governance contract to officially form the group, as seen in protocols like Uniswap and Compound.

With the committee approved, drafting a precise mandate is critical. This document, often called a Treasury Management Framework or Committee Charter, operationalizes the DAO's high-level goals. It should detail: the committee's delegated authority (e.g., ability to deploy up to 10% of treasury assets without a full DAO vote), investment policy (permitted asset classes like stablecoins, staked ETH, or LP positions), risk parameters (maximum concentration limits, counterparty vetting), and reporting requirements (monthly financial statements, quarterly strategy reviews).

The mandate must also establish clear operational guardrails. This includes defining quorum rules for committee votes (e.g., 4 of 7 members), transaction signing thresholds for the associated multisig wallet, and a conflict of interest policy. Tools like Safe{Wallet} for multisig management and Coordinape or SourceCred for tracking contributions are commonly integrated. The final mandate should be ratified via a DAO vote, providing legitimacy and a clear reference point for accountability.

Effective committees implement structured processes for proposal evaluation and execution. A typical workflow involves: 1) A member submits an investment memo detailing the opportunity, risks, and expected returns; 2) The committee debates and votes on-chain via their multisig or a tool like Tally; 3) Upon approval, authorized signers execute the transaction. All decisions and rationales should be documented transparently in a public forum like the DAO's Discord or Governance Forum, ensuring the community can audit the committee's adherence to its mandate.

Finally, the committee's performance must be measured against its mandate. This involves regular reporting of Key Performance Indicators (KPIs) such as treasury yield, portfolio diversification, and slippage costs. Many DAOs, like Index Coop, use Dune Analytics dashboards for real-time treasury transparency. The mandate should include a sunset clause or periodic review (e.g., annually) where the DAO reassesses the committee's structure, performance, and the continuing relevance of its delegated powers, ensuring alignment with the DAO's evolving strategy.

The first prerequisite is a clear, on-chain mandate. This is the committee's constitutional document, encoded within the smart contract's initialization parameters. It defines the committee's purpose, such as "funding public goods on Optimism" or "managing the protocol's insurance fund." The mandate specifies the asset types the committee can hold (e.g., ETH, USDC, governance tokens), the eligible recipients (e.g., verified grant applicants, specific smart contracts), and the spending limits per proposal or period. This immutable logic prevents mission drift and establishes legal guardrails for all future actions.

Second, you must secure the initial treasury capital. A committee cannot operate without assets. This involves transferring funds—often a multi-signature wallet's holdings or a portion of a DAO's treasury—to the newly deployed committee contract. The funding transaction is a critical security event; it should be preceded by a community vote (e.g., a Snapshot proposal) and executed via a secure multi-sig. Document the source of funds and the vote approving the allocation to maintain transparency and legitimacy, as this action is typically irreversible.

The third prerequisite is defining the committee membership. You must decide on the number of initial members, their wallet addresses, and the governance threshold required to approve transactions (e.g., 3 of 5 signatures). Member selection should be based on the mandate: a technical committee may require known developers, while a grants committee needs community stewards. Member addresses are set during contract deployment. Consider requiring members to publicly accept their role, perhaps by signing a message, to ensure accountability and active participation from the start.

Finally, establish the proposal and execution workflow off-chain before the contract goes live. Determine how proposals will be submitted (e.g., via a dedicated forum template), how they will be discussed, what documentation is required, and the review period before a vote. This process should be documented in a public handbook. While the smart contract enforces the final vote, a smooth off-chain process is vital for efficiency and legitimacy. Tools like Discord, Commonwealth, or a custom frontend are typically used to manage this lifecycle, ensuring only well-vetted proposals reach the on-chain voting stage.

A treasury committee is the operational body authorized to manage a DAO's assets. Its creation and mandate must be ratified by the DAO's primary governance mechanism, typically an on-chain vote using a token like OpenZeppelin Governor. The proposal should explicitly define the committee's purpose, such as "to manage the treasury's stablecoin reserves for operational expenses and strategic investments." This on-chain record provides the foundational legitimacy for all subsequent actions.

The committee's mandate must detail its scope of authority. This includes specific permissions like the maximum transaction size it can approve without a full DAO vote, approved asset types (e.g., stablecoins, native tokens, LP positions), and designated blockchain networks. For example, a mandate may state: "The committee is authorized to execute swaps up to $50,000 on Uniswap and to provide liquidity on Arbitrum, but is prohibited from engaging in leveraged derivatives." Clarity here prevents mission creep and establishes clear boundaries.

Legal wrapper integration is critical for real-world operations. Many committees operate through a legal entity like a Cayman Islands Foundation or a Swiss Association. This entity holds exchange accounts, signs service contracts, and provides limited liability for members. The DAO's smart contracts must grant explicit authority to this entity's designated signers, often via a multisig wallet like Safe. The legal entity's operating agreement should mirror the on-chain mandate to ensure consistency between legal and cryptographic authority.

Establishing accountability mechanisms is non-negotiable. The mandate must require regular, transparent reporting. This typically involves monthly or quarterly posts to the DAO's forum (e.g., Commonwealth) detailing treasury inflows/outflows, portfolio performance, and executed transactions with on-chain proof. Furthermore, the committee should be subject to a renewal vote at predetermined intervals (e.g., annually). This allows the DAO to reassess performance and modify the mandate as needed, ensuring the committee remains a servant of the broader collective.

In practice, launching a committee begins with a Temperature Check on the governance forum, followed by a formal proposal. A well-drafted proposal, like Compound's Proposal 62 which established its Grants Committee, includes the exact multisig signer addresses, the full text of the mandate, and the smart contract calls needed to transfer initial funds. Once passed, the authority is encoded on-chain, creating an autonomous yet accountable structure for treasury management.

The first decision is determining the selection body. Common models include a direct vote by the full DAO token-holders, delegation to a smaller elected council (like a grants committee), or nomination by the project's core development team. The choice depends on your governance structure: a broad token-holder vote maximizes decentralization but may suffer from voter apathy, while a council-driven process can be more efficient and informed. Many protocols, such as Compound and Uniswap, use a hybrid approach where a small number of delegates, elected by token-holders, are responsible for ratifying committee appointments.

Once the selector is defined, you must establish clear, objective criteria for candidates. These should be published publicly to ensure fairness. Essential criteria often include: proven expertise in DeFi, asset management, or the protocol's domain; a verifiable on-chain history of constructive governance participation; clear conflict of interest disclosures regarding other projects or investments; and a public statement of intent outlining their approach to treasury management. For example, a candidate's address can be reviewed on platforms like Tally or Boardroom to audit their past voting behavior and proposal submissions.

The nomination and application phase should be open for a fixed period, typically 7-14 days, announced across all community channels. Candidates should submit their application against the published criteria, often via a governance forum post. This allows for community due diligence and questioning. Some DAOs implement a bonding mechanism, requiring candidates to stake a small amount of native tokens when applying. This bond is slashed if they fail to complete their term without cause, discouraging frivolous applications and aligning economic incentives with commitment.

Evaluation of candidates should be a transparent process. If a council is selecting, their deliberations and scoring rubrics should be documented on the forum. If it's a token-holder vote, candidate forums or live community calls ("AMA" sessions) are essential. Voters need more than a name; they need to understand each candidate's philosophy on risk (e.g., conservative yield vs. aggressive deployment), their technical assessment of different asset strategies (like using Aave for lending vs. Curve for stablecoin pools), and their availability for the role. Transparency here builds trust in the committee's eventual decisions.

Finally, formalize the appointment on-chain. This usually involves a Snapshot vote for sentiment signaling, followed by an executable transaction on-chain (via Governor Bravo-style contracts) to officially assign permissions to the committee's multisig or smart contract wallet. The proposal should explicitly list the selected members' addresses and the specific treasury powers being granted (e.g., SUBMIT_PROPOSAL_ROLE, EXECUTE_ROLE). This on-chain record creates an immutable, verifiable link between the community's vote and the committee's authority, completing the legitimate transfer of responsibility.

The committee mandate is a formal document that defines the committee's purpose, scope of authority, and core responsibilities. It should explicitly state what the committee can and cannot do, preventing scope creep and establishing clear accountability. A typical mandate includes: - Purpose: The primary goal (e.g., "to manage and deploy the DAO's treasury assets to fund ecosystem growth"). - Scope: The types of assets under management (e.g., stablecoins, native tokens, NFTs) and permissible actions (e.g., investing, grants, liquidity provisioning). - Limitations: Explicit restrictions, such as a maximum single-transaction size without full DAO approval or prohibited asset classes.

With the mandate established, you must codify the operating rules. These are the bylaws that govern how the committee functions. Key components include: - Decision-Making Process: Define the proposal submission flow, discussion period (e.g., on a forum like Commonwealth), and voting mechanism (e.g., Snapshot for off-chain signaling, on-chain execution via a multisig or governance module). - Quorum & Thresholds: Set the minimum participation (quorum) and the approval threshold (e.g., 4 of 7 multisig signers, or 60% majority vote) required for a decision to be valid. - Meeting Cadence: Establish a regular schedule for review and decision-making, such as bi-weekly strategy calls or monthly grant review cycles.

The rules must be transparent and immutable. They should be published in the DAO's primary documentation hub, such as a GitHub repository or Notion page, and referenced in the governance smart contracts. For example, a Gnosis Safe multisig's threshold should match the mandated approval rule. Using tools like OpenZeppelin Governor allows you to encode these rules directly into the contract logic, ensuring automated enforcement of proposal timers, vote thresholds, and execution delays.

A critical rule to define is the delegated authority limit. This specifies the maximum treasury amount or type of transaction the committee can approve autonomously. Transactions beyond this limit must go to a full DAO vote. For instance, a rule might state: "The committee can autonomously approve grants under $50,000 USD equivalent and swap transactions under $200,000. All larger transactions, investments, or changes to the mandate require a community-wide governance proposal." This balances operational efficiency with community oversight.

Finally, integrate these rules with your reporting framework. The mandate should require regular, transparent reporting on all committee actions—approved proposals, treasury performance metrics, and rationale for decisions. This creates a feedback loop where the community can audit the committee's work against its stated mandate, fostering trust and enabling informed votes during future elections or mandate renewal proposals.

The first step is to formalize the committee's creation through an on-chain governance proposal. This proposal should specify the committee's core mandate, which typically includes: - Managing the treasury's asset allocation - Executing approved budgets and grants - Performing financial reporting and risk assessments. For example, a proposal might use Snapshot to vote on a template that establishes a 5-member committee with a 12-month term. The passing of this proposal grants the committee its initial legitimacy and operational scope.

Next, you must codify the committee's operational rules and limitations. This is done by deploying a smart contract that acts as the committee's multisig wallet, such as using Safe{Wallet} or a custom Zodiac module. The contract enforces rules like quorum requirements (e.g., 3 of 5 signatures), transaction limits per period, and a whitelist of permissible asset types or destination chains. This technical layer prevents unilateral action and embeds accountability directly into the treasury's custody.

A clear separation of powers is critical. The committee's mandate should explicitly state what it cannot do, such as altering the DAO's tokenomics, minting new tokens, or spending beyond a pre-approved quarterly budget without returning to general governance. These guardrails are often encoded in the multisig's permissions and documented in a publicly accessible charter. For instance, Uniswap's treasury governance mandates that certain actions require a full community vote, creating a system of checks and balances.

Transparent reporting is the cornerstone of accountability. The committee should be required to publish regular reports (e.g., monthly or quarterly) that include: - A balance sheet of assets held - A ledger of all transactions with rationale - Performance against the budget - Any changes to risk exposure. These reports should be published on the DAO's forum and referenced in periodic governance updates. Tools like Llama or Dune Analytics can be used to create public dashboards for real-time transparency.

Finally, establish a review and renewal process. The committee's performance and adherence to its mandate should be assessed at the end of its term via a governance vote. This review can be based on predefined Key Performance Indicators (KPIs) like grant execution speed, treasury yield, or reporting compliance. A successful review typically leads to a renewal proposal; a failed review triggers a new election process. This cycle ensures the committee remains accountable to the DAO's members over the long term.

The first step is to propose and ratify the committee's formation through your DAO's governance process. This typically involves a Temperature Check to gauge sentiment, followed by a formal Snapshot vote or on-chain proposal to establish the committee as a core working group. The proposal should specify the initial number of members, their term limits (e.g., 6-12 months), and the multisig wallet that will hold the treasury funds. For example, a proposal on Aragon or Tally might create a TreasuryCommittee entity with a 3-of-5 Gnosis Safe on Ethereum mainnet as its custodian.

Once ratified, you must define the committee's mandate with clear, executable boundaries. This charter should be codified in a public document or a smart contract's access control logic. Key elements include: - Scope of Authority: What assets (stablecoins, native tokens, NFTs) and what maximum transaction size can the committee manage without a full DAO vote? - Investment Policy: Approved DeFi protocols (e.g., staking on Lido, providing liquidity on Uniswap v3), risk tolerance, and prohibited activities. - Reporting Requirements: Frequency of financial reports (monthly/quarterly) and the transparency dashboard (like Llama or Karpatkey) to be used.

With the mandate set, the next phase is committee onboarding and tooling. Members should be added to the multisig wallet and granted access to necessary management interfaces. Establish operational workflows using tools like Safe{Wallet} for transaction building, Zodiac modules for automated rules, and Snapshot for internal committee voting on proposal drafts. It's critical to run test transactions on a testnet to ensure all signers understand the process and that timelocks or approval thresholds function as intended.

The committee's primary operational workflow involves a recurring cycle of proposal, review, execution, and reporting. A member drafts a transaction, such as converting 100 ETH to stETH via the Lido frontend. The proposal, including a rationale and risk assessment, is shared internally. Other members review it against the mandate. If compliant, they sign the transaction in the multisig queue. After execution, the action and new portfolio state are logged in a pre-defined report format for the broader DAO.

Finally, implement oversight and iteration mechanisms. The DAO should schedule regular (e.g., quarterly) reviews of the committee's performance against its mandate. Use on-chain analytics from Dune or Etherscan to audit all transactions. Based on performance and changing market conditions, the DAO can pass new proposals to adjust the committee's mandate, change its composition, or modify treasury allocation strategies, ensuring the system remains responsive and secure.