Communication associations and managers, alike, have the ability and duty to financially protect a Homeowners association’s assets from theft or worst, misappropriation. In addition to professional development, training and education, associations should consider setting a few rules to protect their homeowners’ money.
These policies and procedures are all quite simple to implement.
- Maintain a “no cash” policy.
- Never make out a check to “cash”, and we don’t make out a check that’s payable to the bank unless it is to pay a bank obligation, like a loan or a mortgage.
- Make all vendor payments by check, and never by cash.
- Separate all employee responsibilities using Generally Accepted Accounting Principles (GAAP). This is called “Segregation of Accounting Duties”.
- The person who writes the check is someone other than the person who approves the expenditure and also someone other than the person who signs the check.
- The person responsible for recording transactions and balancing and reconciling accounts is someone other than the person who approves the expenditure or the one who writes the checks.
- We don’t comingle funds, such as operating accounts and reserves, or special assessment accounts.
Your association board and manager should also take additional safeguards such as:
- Only accept checks made payable to the association. We never accept a check made out to a board member or the management company.
- Deposit incoming checks daily, and use a lockbox account at the bank for collecting assessments. This minimizes the number of people that manually process any payment check.
- Require two signatures on a check, particularly for large amounts.
- Keep blank check stock securely locked up at all times.
- Check deposits and payments are reconciled with bank statements monthly.
- Make sure that the association has adequate insurance coverage for embezzlement or fraud.
- When a new staff member is hired or someone new in the association is authorized to handle finances, be sure to check each person’s background and credentials thoroughly.
These simple safeguards will add an additional level of security to your association’s financials and HOA accounting procedures. By implementing these solutions your board will be upholding their fiduciary duty to their association members by protecting the associations’ money.