Fidelity Bonds

Question for the group - our By-laws require anyone who has access to Association funds be covered by a fidelity bond including the MC who must provide the same at their cost. We also require two signatures on each check, MC prepares - BOD signs but the MC has access to the reserve accounts to transfer funds, make deposits etc. With the recent rash of embezzlement of HOA funds by MC's and BOD members is more required?

Section 2.10 Fidelity Bonds
The Board shall obtain fidelity bond coverage with respect to any person who either handles or is responsible for funds held or administered by the Association, in an amount no less than the maximum funds that will be in the custody of the Association or its management agent at any, time while the bond is in force. Provided, however, the fidelity bond coverage must at least equal the sum of three months’ assessments on all living units in the project, plus the Association’s reserve funds. A management agent handling funds for the Association shall also be covered by its own fidelity bond, at the sole cost of said agent, naming the Association as an additional obligee. All bonds shall provide for ten (10) days written notice to the Association before the same may be canceled or substantially modified for any reason.

RogerB
Posts:2046

03/16/2007 9:37 AM Quote Reply
WARNING - KEEP TRACK OF YOUR HOA'S MONEY.
It is very disturbing to constantly be reading of theft of HOA funds (there are two new articles on this today!). How can an HOA avoid theft? Following are some suggestions:

1. Have HOA Fidelity (theft) Insurance sufficient to cover the reserve funds plus about 3 months of operating funds; and
2. Have a yearly financial review or an audit when required or cost justified; plus
3. Get copies of all monthly and quarterly financial institution statements;
4. Require monthly financials from the MC or Treasurer;
5. Study the financial reports, confirm, and compare with the financial institution statements.
6. Two signatures are required for checks which pay out over $500 or are not an approved contractural amount.
7. Require GAPP accounting.

Some additional safeguard we use are:
8. We require checks to be made payable to the HOA, never to us. Checks are deposited promptly into the operating (checking) account.
9. We confirm invoices and cut payment checks which are then signed by an authorized Board member. When necessary checks are stamped which prevent a contractor's mechanics lien when they are cashed.
10. We will not be an authorized signer of payment checks; but are authorized to transfer funds between accounts when necessary.
11. We reconcile all accounts monthly (theft by a Board member who is an authorized signee would be caught within 30 days).

I would appreciate other's thoughts and input.

Glen, a stamp is used on the back side of the check immediately adjacent to the endorsement. It verbage developed by an attorney which in essence states by cashing this check the party swears there are no unpaid bills and they shall accept the responsible to pay for any and all mechanics liens. Sorry, this is not properly stated, but I can't post the exact wording. There have been no mechanics liens to date.