How Does Your HOA Protect it's Money?

We are self managed so there is no one other than board members on the signature card.

Bookkeeper collects, tracks and deposits assessment payments.
Treasurer reconciles bank statements and issues checks.
We require two signatures on every check.
Income/Expense statements are issued each month and posted on website as part of minutes.
Budget summary (budgeted, actual, remaining) issued each month and posted on website as part of minutes.
Financial Review by external CPA every two years.

Additionally, the association carries a crime policy which works as our fidelity bond. The Bookkeeper is required to obtain their own fidelity bond as they are an independent contractor and not covered under our policy.

We require two signatures on every check.

We used to too but the bank told us that even if we required two signatures, in reality the bank only required one.

Yep, our bank also advised us that they only require one signature and would cash any two signature check even without the second signature.
However, we believe having the two signature rule still adds some safeguards so we still use it.

Following is a post on this subject:
RogerB (Colorado)
Posts:4766
05/08/2006 10:31 AM Quote Reply

Have you read the article "Property Managers Accused of Theft"? This seems to be a too common occurance. If you have read DARCO's ad under the HOA Professionals tab perhaps you notice we remove possibilities for theft.

Does a financial review or audit prevent theft? NO! So what can an HOA do? Start by setting up policies and procedures which prevent the MC from access to funds. How? We use the following procedures and require them in our Management Agreements:

All payments must be made payable to the HOA - never to the MC. The payments are sent to the MC or the record of deposits is sent to the MC.

All checks must be signed by a Board member who is a signee on the account - no one in the MC ever signs a check or has the ability to withdraw funds. However, we have access to view the account, transfer funds between accounts, and receive and reconcile the monthly statements.

The monthly financial reports are e-mailed to all Board members and copies of the bank statements are sent quarterly to the Treasurer for comparison to the financial statements.

Anything else? Yes, the HOA needs fidelity insurance. This protects against theft by Board members as well as the MC. Does DARCO provide anything else? Yes, to our clients.

The above procedures may not be acceptable to some MCs. They may argue that they need to pay for emergency repairs. But this can be done by authorizing a limit on expenditures which they can authorize without Board approval. Also a working, or petty cash, fund can be provided to the MC.

Protect your HOA funds with good money handling procedures.

P.S. Two signatures only gives a false sense of security.

Two comments to the above posts:

Depending on your bank, it may not necessary to scan statements as they may be available online already in PDF format. The only hitch is that anyone with access to obtain the copies will have access to the entire account. Still, treasurer or other board member can download pdf statements and email copies to everyone else.

I found out a decade ago that a person can deposit a check made payable to a business or someone else by putting in through the ATM. Checks that no teller would allow you to deposit to your own account fly right through the ATM without question. My bank does not even require an endorsement signature for ATM deposits.

Thanks for reminding me. Our Association does not have an ATM card or Credit card.