Treasurer's Responsibilities - Please only current or past Treasurer's reply. No PMs MCs or if you have not served as an Association Treasurer

Started by TimB4 • 53 replies • 3125 views

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TimB4 (Tennessee)
Posts: 21,062

Posted:

On a different thread, I posted what I believed the responsibilities of an Association Treasurer were. I even offered links to reference material. In that thread, it was suggested that I ask the question on this forum as to how many Treasurers really take that responsibility.

To answer that question, I ask the following of current and past Association Treasures (please only respond if you are or have served as Treasurer):

1) Do you have control of the Association financial accounts?
What I mean by this is, are the accounts in the Association name at a bank of the Boards choosing; your name is on the signature card at the bank and, if available, you have full access to the accounts through the Banks website.

2) Do you prepare the financial statements for the meetings?
Be it a balance sheet, budget vs actual comparison or a simple income and expense statement, who prepares them for your Association.

3) Do you control the check book?
This would be either writing the checks yourself or simply signing the checks that someone else prepared for signature.

4) Do you receive the Bank statements?
This can be either directly, a copy each month or simply that they are accessible to you (24/7) through the Banks website.

5) Do you have copies of all deposit slips?
Having the duplicate of the deposit slip utilized for you or someone else to make the deposit OR have access to all deposits (24/7) via the banks website.

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?

8) Do you keep the individual lot ledgers (or someone else)?

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
This could be done by spot check or an actual audit of the ledgers.
I would say that if you have annual financial reviews by an independent entity (CPA or financial committee), then this would qualify as a verification (but only if done annually).

Thank you

Tim

TimB4 (Tennessee)
Posts: 21,062

Posted:

For my Association:

1) Yes
2) Yes, I prepare them
3) Yes, I have full control of the checkbook and other accounts
4) Yes
5) Yes
6) I reconcile the accounts
7) We are self managed
8) We utilize an independent contractor to make deposits and keep the lot ledgers.
8a) Yes, I spot check (10%) the ledgers every 6 months

NpS (Pennsylvania)
Posts: 4,216

Posted:

My HOA:

1. Board has access to all accounts. MC has access to operating account.
2. MC prepares financial statements.
3. Board writes reserve checks. MC writes op checks.
4. Board receives reserve statements. MC receives op statements. Both are attached to financials.
5. Board does not have copies of deposit slips. Board does have 24/7 visibility into MC's computer system.
6. MC reconciles bank accounts. Audited once per year. Treas should reconcile, but doesn't - This IMO is a weakness in the way we do things.
7. MC is used for financials only.
8. MC keeps payment ledgers on each unit. Board keeps all other records, such as architectural changes and non-financial communications.
8a. Homeowner ledgers available online 24/7.

9. Are your books audited? Yes - once per year.

10. Do you think your financial assets are secure? Generally yes. IMO, Tim's approach is less safe than he thinks. Too much responsibility is in the hands of one person. Others rely on him, but I don't get the sense that anyone checks what he does. Security of assets should not depend on one particular individual.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By NpS on 09/24/2015 4:44 AM

IMO, Tim's approach is less safe than he thinks. Too much responsibility is in the hands of one person.

I agree and disagree.

We do have a two signature requirement. Therefore, no check is issued without both signatures.
Additionally, the ledger tracking and deposits are done by a separate party (the bookkeeper).

As with your Association, books are open to any Board member who requests.
Financials and Treasurer's report are part of the minutes and the minutes are online for any member to review.

All Board members are on the banks signature card and can access banks information.

However, I do recognize that advantages of the situation (because lets face it, nobody asks to see the books to verify the financials) could be taken if one was so tempted.

Quote:

Posted By NpS on 09/24/2015 4:44 AM

I don't get the sense that anyone checks what he does.

We do have a CPA check the books.
For cost considerations, the membership did authorize a financial review every other year vs. every year.

Quote:

Posted By NpS on 09/24/2015 4:44 AM

Security of assets should not depend on one particular individual.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By TimB4 on 09/24/2015 5:04 AM

Posted By NpS on 09/24/2015 4:44 AM

IMO, Tim's approach is less safe than he thinks. Too much responsibility is in the hands of one person.

I agree and disagree.

We do have a two signature requirement. Therefore, no check is issued without both signatures.
Additionally, the ledger tracking and deposits are done by a separate party (the bookkeeper).

*** IMO, two signatures requirement not as safe as it may have been previously. Today with the ability to do online transactions, money can be moved around without any physical signature at all. I agree that your bookkeeper provides some separation, as long as bookkeeper is capable of making independent decisions. If just following orders, can be snookered.

As with your Association, books are open to any Board member who requests.
Financials and Treasurer's report are part of the minutes and the minutes are online for any member to review.

All Board members are on the banks signature card and can access banks information.

However, I do recognize that advantages of the situation (because lets face it, nobody asks to see the books to verify the financials) could be taken if one was so tempted.

*** You're right. No one asks. And many wouldn't know how to read our financials.

Quote:

Posted By NpS on 09/24/2015 4:44 AM

I don't get the sense that anyone checks what he does.

We do have a CPA check the books.
For cost considerations, the membership did authorize a financial review every other year vs. every year.

*** When you step down from an Audit to a Review, you are more exposed. If we were more stable, we might take that path. But, we've had 4 MCs in 6 years. Wouldn't take the risk. The question for your HOA is what should be done when Tim is no longer the Treas. That IMO is your HOA's unique exposure.

Quote:

Posted By NpS on 09/24/2015 4:44 AM

Security of assets should not depend on one particular individual.

I agree. However, from your posting, it's not that different with your Association.

I applaud you for separating access to your operating fund from your Reserves.
However, you rely on the MC (one entity) for the operating fund (similar to my Board replying on one entity (the Treasurer) for theirs.

*** Not give MC access to reserve accounts had a major effect on our fidelity insurance costs. Don't really consider MC to be one person. Also, our MC handles some transactions per our instruction - which is a board level decision. The best comparison I can offer is the Clusters Reserve issue currently in discussion in another thread. As a Board, we would not allow our MC to arbitrarily allocate expense.

If I understand you correctly, You have access to the MC computers but not the banks computers for the operating fund. Hence, no actual validation 24/7. However, this is offset by the attachment of the bank statements to the Treasurers report. (something I'll ask my Board if they want to implement).

*** We could probably have online access to the op bank account. Don't see the need. Monthly reports include bank statements plus copies of all checks.

By not maintaining your own financial records, if you get a poor MC there is risk of losing said records (of course the same could be said if an Association gets a bad Treasurer).

*** The Fraud Triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components which, together, lead to fraudulent behavior:

1. Perceived financial need;

2. Perceived opportunity; and

3. Rationalization.

Unfortunately, every arrangement is susceptible to bad MCs, bad Boards, bad Treasurers, and bad Bookkeepers.

Sikubali jukumu. Read all posts at your own risk.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

We are a relatively easy to control/manage HOA. We are 113 owners in standalone homes (40 side by side duplexes in Phase one and 33 single homes in Phase 2). We have no amenities. We are public streets. Town water and sewage. Private (owner paid and optional) trash collection. Our dues are $600.00 per year thus a $67,800.00 per year budget. The HOA does all external home shell maintenance and landscaping. Landscaping is about 40% of our budget. The BOD interviews and selects the landscape company. Our MC basic cost is $600.00 per month and we average about $100.00 per month more for mailings, etc.

We could easily be self managed but as no one is willing to step forward and take charge, it will probably never happen. I was on the original BOD that chose our MC. We chose them (from among 3 we interviewed) as they represent about 15 communities similar to our own. Our BOD is quite hands off and we rely quite heavily on our MC to operate our HOA finances. I know this would make Tim rather nervous...LOL

1) Do you have control of the Association financial accounts?
Pres, VP and Treasurer are on the signature card. We use a lockbox system from a national bank for quarterly dues payments with the monies then transferred to our PM. The BOD has a password to freeze the transfers to the MC. Our MC does not have access to our Reserve Account. Only the Pres and VP and Treasurer can access the Reserve Account.

2) Do you prepare the financial statements for the meetings?
Our MC prepares and submits them to BOD Members monthly.

3) Do you control the check book?
Our MC writes and signs all checks. Checkbook ledger report is part of BOD Monthly Reports from the MC. The BOD has a small ($500.00) checking account for emergency situations. Pres, or VP, or Trea. can write checks on it.

4) Do you receive the Bank statements?
They are included in the BOD Monthly Reports from the MC.

5) Do you have copies of all deposit slips?
Deposits are done to our lockbox and we get a monthly report.

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?
Our MC does it.

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?
We have a Property Management Company.

8) Do you keep the individual lot ledgers (or someone else)?
Not sure on lot ledgers but our Monthly Reports include any delinquencies and a report concerning the few that our law firm has arranged a payment plan with.

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
We are on our first year of self management and using an MC. We had discussed a yearly audit but have done nothing. I expect if the year end report is as we have budgeted for and expect, then there will not be a call for an audit.

Overall, we are a simple to manage/oversee HOA.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By JohnC46 on 09/24/2015 7:57 AM
5) Do you have copies of all deposit slips?
Deposits are done to our lockbox and we get a monthly report.

Did you have trouble finding a bank that would set you up with a lockbox for such a small account? Is it expensive?

Sikubali jukumu. Read all posts at your own risk.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By NpS on 09/24/2015 9:20 AM

Posted By JohnC46 on 09/24/2015 7:57 AM
5) Do you have copies of all deposit slips?
Deposits are done to our lockbox and we get a monthly report.

Did you have trouble finding a bank that would set you up with a lockbox for such a small account? Is it expensive?

Our MC uses this method (via BB&T Bank) for all their accounts. If memory serves me correctly, they will not do a manual system as in send dues to them. Part of this is a payment book is sent to each owner. One also can pay at any BB&T Bank, pay with a credit card, have their account drafted, etc. We make it real easy for people to pay.

Most banks offer a lock box service so check some local to you. Even though BB&T has local offices (in SC), the payments are sent to one of their locations in FL.

I would have to go back and look for the charges as I do not know them off the top of my head.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By JohnC46 on 09/24/2015 10:21 AM

Posted By NpS on 09/24/2015 9:20 AM

Posted By JohnC46 on 09/24/2015 7:57 AM
5) Do you have copies of all deposit slips?
Deposits are done to our lockbox and we get a monthly report.

Did you have trouble finding a bank that would set you up with a lockbox for such a small account? Is it expensive?

Our MC does the check processing in-house. They call it a lock-box but it really isn't. The address is the general PO Box for the MC. Checks from other associations can get mixed in.

We looked into setting up our own lock-box a couple of years ago. We were turned down because of our size. So when I saw your lock-box post, I thought I'd ask.

Sikubali jukumu. Read all posts at your own risk.

DouglasK1 (Florida)
Posts: 2,046

Posted:

1) Myself and one other board member are on the signature card for the checking account. We have our reserves in savings accounts at another bank, two other directors are on that account.
2) Yes, treasurer.
3) Yes, I have the checkbook. We gave up on requiring dual signatures since our bank doesn't support it. I make most payments via online bill pay and rarely write a check from the manual checkbook.
4) Yes
5) Yes
6) Me
7) Self managed
8) I keep all of the books, we use Quickbooks.
8a) N/A

Escaped former treasurer and director of a self managed association.

JerryD5 (Colorado)
Posts: 218

Posted:

We do not have a designed Treasurer position. Only the President. Like John, our BOD is pretty hands off when it comes to financials. Our MC pays all of our bills, handle our dues, and maintains our website. They are fairly small company that doesn't have a fixed office space (the managers telecommute a lot). They subcontract a phone service (you call in, they take a message and email the message to the appropriate manager). They also have a parttime account manager that balances the books. I am on the signature card for our savings and checking accounts but I do not have access to write checks (nor would I want to). It suits our HOA because no one would want to do any of this. We work with a budget of $68,000. One good thing our MC does is put all of financials in Dropbox so we can access it at anytime. So I (and the other board members) can look at our monthly bank statements, checks written, etc. They did say they wanted to load a new software program where the board president had to approve every single bill due/payment. However it was going to cost us $40 a month to implement the software and it wasn't worth the effort.

BillH10 (Texas)
Posts: 1,217

Posted:

Tim

My responses below pertain to the Association in which we lived, and not as a Board president and MC owner, which I am now.

1. I did not have control of, or access to the accounts, even on a read only basis.
2. All the financial documents/reports were prepared by the MC.
3. The checks were prepared by, and signed by, the MC.
4. Copies of the bank statements were included in the monthly financial package, after I asked for them to be presented in that manner.
5. No copies of deposit slips at all. Until we received the monthly statements, we could not see any numbers other than those in the monthly financial report.
6. The MC allegedly reconciled the accounts.
7. The association was (and is) managed by a MC.
8. No, I never saw the ledgers. I do not recall if audits were performed, I tend to think not.

To my knowledge, none of the foregoing has changed.

I've been giving thought to your original post on this subject and wish to present my views: (this conversation would be a whole lot easier and enjoyable over coffee or something.

1. My sense is the vast majority of association treasurers do not have the capability, software, or time to become immersed in the financial affairs of the association to the degree you suggest.
2. My observation of the process for selecting the Treasurer is it is the position people shy away from the most--after President. The potential candidates get a real "deer in the headlights" look when it is suggested they be treasurer. It generally takes a lot of words from others who have been on the board to convince the candidate the PM or MC takes care of all the financials.
3. My experience in the corporate world was I had "people" who took care of the backroom activities. Of course I was responsible, and I had to understand the financial aspects of my organization, but I did not have to know how to prepare my financial reports, only read and interpret them. I did not have to worry much about malfeasance as Internal Auditing and our software controls provided oversight.
4. I understand the point you are making, and your post has given me food for thought. I would like to see a series of webinars developed, such as by CAI, to educate board members. Too often HOA financial controls rely heavily on the integrity of the MC personnel and not on arms length, separately verifiable observations, audits, and reviews.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Bill,

Excellent views on the subject and I agree with them.

I also agree it would be more enjoyable over morning coffee.

Tim

TimB4 (Tennessee)
Posts: 21,062

Posted:

Jerry,

Thanks for providing that info. I'm surprised that you don't have a designated Treasurer.
Typically, Corporate law specifies that a required Officer is the Treasurer. This is true for the CO Nonprofit Corporation act as well:

7-128-301. Officers.
(1) Unless otherwise provided in the bylaws, a nonprofit corporation shall have a president, a secretary, a treasurer, and such other officers as may be designated by the board of directors.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Everyone,

Thank you for participating and providing the responses.

It appears that everyone uses what works for them.

Hopefully, these responses provided some suggestions on how you may utilize some procedures others use to enhance your own Association and fulfill the Treasurer responsibilities

JerryD5 (Colorado)
Posts: 218

Posted:

Quote:

Posted By TimB4 on 09/24/2015 6:27 PM
Everyone,

Thank you for participating and providing the responses.

It appears that everyone uses what works for them.

Hopefully, these responses provided some suggestions on how you may utilize some procedures others use to enhance your own Association and fulfill the Treasurer responsibilities

Thanks for bringing up the topic. It is interesting to see what other HOAs do. I don't think anyone has ever questioned not having a treasurer. Everyone is content with the PM paying the bills on our behalf. When we switched MC last year, myself as President and 1 other board member signed documents to open up the accounts. It was the same with the last MC. They did everything. The only difference is they were a very large company and had their own software for accounting, etc. Plus their accounts receivable staff handled multiple property.

At our next meeting, I will ask the question. Though truthfully, the association could care less as long as they get their lawn mowed, the snow shoveled and the dues do not get raised. I don't even think I could convince another board member to even volunteer to be treasurer. They barely do anything as it is.

JimR24 (Texas)
Posts: 399

Posted:

See below answers....

1) Do you have control of the Association financial accounts?

Yes i have full access to both our banking and reserve accounts The PM does not have access to the reserve account.

2) Do you prepare the financial statements for the meetings?

I prepare the fnancials from the Quickbooks file i am sent each month by the PM.

3) Do you control the check book?

The PM produces the check for our signatures. I don't write checks but probably could do so if i wanted.

4) Do you receive the Bank statements?

yes

5) Do you have copies of all deposit slips?

yes

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?

The PM reconciles the check book. I reconcile the reserve account.

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?

We use a PM.

8) Do you keep the individual lot ledgers (or someone else)?

Yes, since i have the Quickbooks file - i can produce all ledgers.

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?

Yes i verify all ledgers and postings.

Thanks for asking!

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

PitA
Posts: 1,416

Posted:

Am not presently, but was for many years, treasurer:

1) Do you have control of the Association financial accounts?
What I mean by this is, are the accounts in the Association name at a bank of the Boards choosing; your name is on the signature card at the bank and, if available, you have full access to the accounts through the Banks website.

YES

2) Do you prepare the financial statements for the meetings?
Be it a balance sheet, budget vs actual comparison or a simple income and expense statement, who prepares them for your Association.

YES

3) Do you control the check book?
This would be either writing the checks yourself or simply signing the checks that someone else prepared for signature.

YES + additional director signature (internal safety)

4) Do you receive the Bank statements?
This can be either directly, a copy each month or simply that they are accessible to you (24/7) through the Banks website.

YES we are fortunate to actually have a BOD office in the clubhouse and mailbox

5) Do you have copies of all deposit slips?
Having the duplicate of the deposit slip utilized for you or someone else to make the deposit OR have access to all deposits (24/7) via the banks website.

YES on file in office

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?

TREASURER/ME

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?

SELF MANAGED[/b[

8) Do you keep the individual lot ledgers (or someone else)?

TREASURER/ME

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
This could be done by spot check or an actual audit of the ledgers.
I would say that if you have annual financial reviews by an independent entity (CPA or financial committee), then this would qualify as a verification (but only if done annually).

N/A have an annual compilation by CPA

All accomplished using QuickBooks Pro - easy, peasy albeit time consuming

CyrstalB (Maryland)
Posts: 457

Posted:

Quote:

Posted By TimB4 on 09/24/2015 2:53 AM
On a different thread, I posted what I believed the responsibilities of an Association Treasurer were. I even offered links to reference material. In that thread, it was suggested that I ask the question on this forum as to how many Treasurers really take that responsibility.

To answer that question, I ask the following of current and past Association Treasures (please only respond if you are or have served as Treasurer):

1) Do you have control of the Association financial accounts?
What I mean by this is, are the accounts in the Association name at a bank of the Boards choosing; your name is on the signature card at the bank and, if available, you have full access to the accounts through the Banks website.

2) Do you prepare the financial statements for the meetings?
Be it a balance sheet, budget vs actual comparison or a simple income and expense statement, who prepares them for your Association.

3) Do you control the check book?
This would be either writing the checks yourself or simply signing the checks that someone else prepared for signature.

4) Do you receive the Bank statements?
This can be either directly, a copy each month or simply that they are accessible to you (24/7) through the Banks website.

5) Do you have copies of all deposit slips?
Having the duplicate of the deposit slip utilized for you or someone else to make the deposit OR have access to all deposits (24/7) via the banks website.

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?

8) Do you keep the individual lot ledgers (or someone else)?

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
This could be done by spot check or an actual audit of the ledgers.
I would say that if you have annual financial reviews by an independent entity (CPA or financial committee), then this would qualify as a verification (but only if done annually).

Thank you

Tim

As previous President/treasurer of a small HOA without amenities and low assessment:
1) Do you have control of the Association financial accounts? Yes

2) Do you prepare the financial statements for the meetings? Yes

3) Do you control the check book? Yes, as Prez could only sign the checks anyway.

4) Do you receive the Bank statements? Yes, and those were passed on to the current board members for their own records.

5) Do you have copies of all deposit slips? Yes

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?
Yes as the treasurer I did it, easy to do with so little $$ and few bills.

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors? We are now self managed, and when were being "managed" and I use that term loosely, the MC would of answered yes to all of those questions.

8) Do you keep the individual lot ledgers (or someone else)? Yes, in a hardbound book to pass on to future Directors without the need of a learning curve with any software.

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
Yes, with MC, we did look them over at the quarterly meeting, only to make sure nothing seemed out of place.

MarkG6 (North Carolina)
Posts: 4

Posted:

1) Do you have control of the Association financial accounts?
I have full oversight of the accounts and the Management Company we employee controls income and expense with detailed records that the Finance Committee reviews each month with a fine tooth comb – the run can be as long as 40+ pages

2) Do you prepare the financial statements for the meetings?
Our Management Company accomplishes this task

3) Do you control the checkbook?
No, I Approve all expenditures and reimbursements above $2,500.00

4) Do you receive the Bank statements?
Management Company

5) Do you have copies of all deposit slips?
Copies are on file within the software and a hard copy kept on file for the fiscal year and audit review

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?
Management Company

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?
Management Company (4) in the office CM, Assit CM, etc

8) Do you keep the individual lot ledgers (or someone else)?
Management Company

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
Finance Committee reviews each month and we have an independent audit each year (we selected the Accounting Firm)

PatrickO1 (Michigan)
Posts: 13

Posted:

1) Do you have control of the Association financial accounts?
What I mean by this is, are the accounts in the Association name at a bank of the Boards choosing; your name is on the signature card at the bank and, if available, you have full access to the accounts through the Banks website.
We have a CPA that handles the deposits and check writing. The Treasurer can also sign checks and is on the signature cards at the bank.

2) Do you prepare the financial statements for the meetings?
Be it a balance sheet, budget vs actual comparison or a simple income and expense statement, who prepares them for your Association.
The CPA prepares all financial statements since he maintains the books of the Association.

3) Do you control the check book?
This would be either writing the checks yourself or simply signing the checks that someone else prepared for signature.
The Treasurer does not write or sign checks. The check stock is maintained by the CPA.

4) Do you receive the Bank statements?
This can be either directly, a copy each month or simply that they are accessible to you (24/7) through the Banks website.
Some Treasurers over the years have chosen to also receive copies of the statements from the bank. Most years the treasurer relies on the CPA to handle the bank statements.

5) Do you have copies of all deposit slips?
Having the duplicate of the deposit slip utilized for you or someone else to make the deposit OR have access to all deposits (24/7) via the banks website.
Again, the CPA handles it.

6) Who reconciles the bank accounts (you, a PM/MC, employee/temp or an independent contractor)?
The CPA handles it. The monthly financials are reviewed by the treasurer.

7) Are you self managed or utilize a management company, property manager, employees, temps or independent contractors?
Self managed. We have no employees. We pay the CPA $3,600 per year to maintain the Association financials and to prepare tax returns. He also does mailings several times a year for us. We have 82 units.

8) Do you keep the individual lot ledgers (or someone else)?
The CPA does.

8a) (for those utilizing an MC/PM or Independent Contractor) Do you verify those ledgers?
This could be done by spot check or an actual audit of the ledgers.
I would say that if you have annual financial reviews by an independent entity (CPA or financial committee), then this would qualify as a verification (but only if done annually).

In the last few years we have done a review of the CPAs files. We have never had an audit. However, I've tracked the financials as an Owner for 15 years on a spreadsheet and the costs have not varied much over that period of time. I run a variety of graphs in additional to the standard P&L and Balance Sheet prepared by the CPA. I will note this arrangement with the CPA was put in place 22 years ago after the Association had a mgt firm embezzle funds.

We have a detailed rule and regulation which serves as a policy and procedure for the role of the treasurer and to some extent the CPA.

RogerB (Colorado)
Posts: 5,067

Posted:

Tim,
WOW!! Your thread has prompted some very interesting responses. No wonder that I read about the numerous thefts of HOA funds. I have waited to respond because we are now a management company. My thoughts are based on years of experiece as a past Treasurer of several HOAs and Professional Organizations.

1) Since your first post did not include fidelity insurance perhaps there was little emphasis on this, which is very first line of defense against theft. Board members have a fiduciay responsibility and thus need to be protected. Make sure the HOA is incorporated within the state and that the Board members are protected by "a corporate shield". Furthermore, all HOAs need adequate D&O insurance.

2) IMO, no one other than a Board member should be a signer on a financial account.

3) Be totally open on all financials. This includes providing a monthly report to all Board members which includes a Balance Sheet; Income Statement with four columns on each line item which monthly and YTD actural and budgeted amounts of income and expenses; check register; aged receivables; and any other reports desired by the Board.

4) Independently verify the financials at least yearly or more often.

5) Finally, do not get a false sense of securtiy by mearly having two signatures on a check. This does not prevent theft; at best it may give psychological comfort to the signers on the accounts.

As a management company we have developed and used accounting and financial procedures resulting in 100% sucess. I believe no less should be expected from Board members who act as the care takers for their association.

PitA
Posts: 1,416

Posted:

Do not forget the "FIDELITY BOND".

This is NOT D&O Insurance, nor theft protection insurance, but a SEPARATE BOND covering the signatories on file with the bank.

The bond's issuer WILL run a (albeit limited) B/G check on the insured persons which MAY disqualify some.

My HOA pays $750 / year for 3 directors covering $500,000

Peace of Mind = priceless

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Pita

Not to be naive, but my concern would be more with a PM absconding/cheating with the money then a fellow BOD Member.

How does one insure against this?

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By JohnC46 on 09/29/2015 2:43 PM
Pita

Not to be naive, but my concern would be more with a PM absconding/cheating with the money then a fellow BOD Member.

How does one insure against this?

Hi John - not sure if this is the best way to do things; however, what we have done it to require the property manager to have fidelity bond coverage with our Association as a named insured. What do u think?

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By JimR24 on 09/29/2015 2:50 PM
Posted By JohnC46 on 09/29/2015 2:43 PM
Pita

Not to be naive, but my concern would be more with a PM absconding/cheating with the money then a fellow BOD Member.

How does one insure against this?

The Association pays for the policy, right?

JimR24 (Texas)
Posts: 399

Posted:

No the Association does not pay for the policy. Our PM has the contractural responsibility to fund the fidelity bond in full and must supply us with a copy of the policy.

Lovin' life with my honey!
and, President of HOA in Texas

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By JimR24 on 09/29/2015 3:03 PM
No the Association does not pay for the policy. Our PM has the contractural responsibility to fund the fidelity bond in full and must supply us with a copy of the policy.

Really

I would pass

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By RichardP13 on 09/29/2015 3:12 PM
Posted By JimR24 on 09/29/2015 3:03 PM
No the Association does not pay for the policy. Our PM has the contractural responsibility to fund the fidelity bond in full and must supply us with a copy of the policy.

Really

I would pass

Not sure if i understand what u mean by saying that you would pass. Pass on what? Please explain more. Thanks!

jim

Lovin' life with my honey!
and, President of HOA in Texas

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RogerB on 09/29/2015 8:14 AM
Tim,
WOW!! Your thread has prompted some very interesting responses.

1) Since your first post did not include fidelity insurance perhaps there was little emphasis on this, which is very first line of defense against theft. Board members have a fiduciay responsibility and thus need to be protected. Make sure the HOA is incorporated within the state and that the Board members are protected by "a corporate shield". Furthermore, all HOAs need adequate D&O insurance.

Roger,

I agree with you about a bond or fidelity insurance.
I didn't ask because I expected that this was a standard requirement for Associations. Perhaps I shouldn't have expected that.

Like Jim, and others, I agree that any entity that is hired (PM, MC or independent Contractor)to assist with Association financials should be bonded. Unfortunately, as has been pointed out, even if they are bonded, they may be handling so many Associations that the bond is not sufficient to actually cover.

Bonding should be at the expense of the PM, MC or contractor (although, in reality we all know that those costs are passed on in one form or another to the Association).

Thanks for bringing this up.

Tim

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By JimR24 on 09/29/2015 3:21 PM
Posted By RichardP13 on 09/29/2015 3:12 PM

Posted By JimR24 on 09/29/2015 3:03 PM
No the Association does not pay for the policy. Our PM has the contractural responsibility to fund the fidelity bond in full and must supply us with a copy of the policy.

Really

I would pass

Not sure if i understand what u mean by saying that you would pass. Pass on what? Please explain more. Thanks!

jim

Jim,

I believe that RichardP, who owns a MC, is saying that he would pass on bidding on any contract that required him to have such a bond/insurance which he would have to pay for.

PitA
Posts: 1,416

Posted:

Quote:

Posted By JohnC46 on 09/29/2015 2:43 PM
Pita

Not to be naive, but my concern would be more with a PM absconding/cheating with the money then a fellow BOD Member.

How does one insure against this?

Simple.

The PM prepares the checks FOR the Treasurer's signature.

The PM does/should NOT have actual access to the funds.

Should a NON signatory forge a check the bank would be responsible for 'make-up'.

Should a signatory embezzle/draw on account the 'bonder' would be responsible.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Not sure if i understand what u mean by saying that you would pass. Pass on what? Please explain more. Thanks!

jim

Jim

I appreciate Tim speaking on my behalf, but it doesn't quite work out that way. In all associations I have managed prior to owning my own company, per the insurance company's and the association CCRs, it is the ASSOCIATION's responsibility to purchase their own insurance. Who pays for Tim, as holder of the checkbook, the association, or does Tim pay?

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Not sure if i understand what u mean by saying that you would pass. Pass on what? Please explain more. Thanks!

jim

Jim

To answer your question directly, I would withdraw my bid once I realized the association wanted an additional bond. Many times I don't see the financials or govern docs prior to submitting a proposal. Who know what was going on prior that you may now get drawn into. Trust me, I have seen some bad ones.

PitA
Posts: 1,416

Posted:

p.s. re: fidelity bonding

my HOA is self managed PLUS our Covenant specifies that anyone handling association funds must be 'fidelity bonded' for the 'maximum amount' of said funds expected to be in their custody/control

Should the 'managing agent' have account access and pay for said bond, the association would be paying anyway as said cost is 'rolled into' the agent's cost of business.

IMO: better for the association to directly pay as it gives certainty of bond's existence, amount covered, AND (albeit indirectly) some B/G checking of persons handling finances

However, IMO, the agent should NOT be a signatory to the associations funds (with an exception maybe for a small amount in a 'daily operation' fund).

DISTRUST and VERIFY

perhaps you will not find evil, but you will be prepared if you do

JimR24 (Texas)
Posts: 399

Posted:

Doesn't work that way in Texas Richard. Each entity is responsible for insuring its own risk. IMHO, the each PM should be responsible for insuring itself against its own risk, not the Association. The Association insures against its own risk; therefore, the PM should insures against its own. Interesting stuff...huh?

Richard, i am sure you have a very reputable company; however, you are correct, your company wouldn't be a match for our condo association. Thanks for the info though!

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

RichardP13 (California)
Posts: 3,868

Posted:

Jim

Who works for who? Everyone here says the MC works under the direction of the BOD. Governing docs also state that the BOD is responsibility for the operation of the association.

JimR24 (Texas)
Posts: 399

Posted:

Quote:

Posted By RichardP13 on 09/29/2015 4:00 PM
Jim

Who works for who? Everyone here says the MC works under the direction of the BOD. Governing docs also state that the BOD is responsibility for the operation of the association.

Yes Richard, you are correct about the BOD being in charge. However, each PM should have its own protections in place in cases where one of their employees or owners defrauds the Association. Believe me, i have seen some bad PM's - been there, done that...lol...

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By JimR24 on 09/29/2015 4:04 PM
Posted By RichardP13 on 09/29/2015 4:00 PM
Jim

Who works for who? Everyone here says the MC works under the direction of the BOD. Governing docs also state that the BOD is responsibility for the operation of the association.

We have our own protection, but it is not on an individual association basis. I have seen my share of bad ones also.

JimR24 (Texas)
Posts: 399

Posted:

Excellent Richard - you are correct in insuring against your own risk. It's your duty, just like it's the Association's responsibility to insure against its own risk. And hey, thanks for the dialog...have enjoyed!

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RichardP13 on 09/29/2015 3:37 PM

In all associations I have managed prior to owning my own company, per the insurance company's and the association CCRs, it is the ASSOCIATION's responsibility to purchase their own insurance. Who pays for Tim, as holder of the checkbook, the association, or does Tim pay?

I'm not a third party vendor doing the work.
Therefore, the Association pays.

However, when we utilized an independent contractor for bookkeeping service, that individual obtained their own insurance/bond.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TimB4 on 09/29/2015 5:53 PM
Posted By RichardP13 on 09/29/2015 3:37 PM

In all associations I have managed prior to owning my own company, per the insurance company's and the association CCRs, it is the ASSOCIATION's responsibility to purchase their own insurance. Who pays for Tim, as holder of the checkbook, the association, or does Tim pay?

As I stated before, I carry fidelity insurance, just not a separate policy for each association I manage, NOR is it required.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By RichardP13 on 09/29/2015 4:00 PM
Jim

Who works for who? Everyone here says the MC works under the direction of the BOD.

Working under the direction is not the same as working for someone.

An MC/PM is contracted to perform specific functions.
The Association is the MC/PMs client.

Just as with other businesses, the client specifies/directs what they are wanting from the working relationship. However, the business pays for and carries the applicable insurance/bonds required to perform the work.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Richard,

looks like we were posting at the same time.

If you carry fidelity insurance then I think you would meet the requirements being outlined by many who are posting on this thread.

As I previously pointed out, the MC's insurance may or may not be enough depending on the number of clients and the total value of the funds under the MC's control. Something an Association may want to ask of potential MCs.

RichardP13 (California)
Posts: 3,868

Posted:

Tim

What Jim described is having a policy naming the association as the insured. I have had one instance like that where it was required by a lender and the association paid for the policy. Separate from their own fidelity policy.

SheliaH (Indiana)
Posts: 6,964

Posted:

Our association’s management company prepares our financial reports, which consists of the balance sheets, income-expense statement, lockbox report, bank statement with copies of checks written against the Association’s account, a report that describes why that check was written (e.g. legal work on account #1234) and a delinquency report which included recent activity by the Association attorney.

When I served as treasurer, I would review the report before the meeting and prepare a summary, although all the Board members received the same report. If I saw any weird numbers on the report, I’d ask the property manager for an answer – if it arrived before the meeting, I’d update my report, otherwise, the manager was expected to provide that information during the meeting (treasurer’s report section).
The president and treasurer had signing authority on the accounts, so the manager would bring checks to the meeting for our signature (one or the other could sign it). The company generally paid routine bills automatically as authorized by the board (e.g. insurance premiums.)

Our accountant reviews the books every year and we haven’t found any major problems, although I’m about to suggest to the Board (I left last year) that we have a full financial audit. Not that I don’t trust our property manager (she was very good), but she retired last month and I’ve never heard of the association ever having one (at least not during the 10 years I served) and think it would be good to take a long look at where the money’s going and where we might be able to save.

Your #1 is also interesting to pursue – the property manager is part of a large corporation and I believe everyone uses the same bank, but I’ve always felt we should at least consider using a local bank for easier access. In the meantime, I’ve never thought about internet access at all, so I’ll suggest that as well (thanks for the tip!)

Some of you have also spoke of fidelity bonds, which I will also suggest we pursue. I first heard about this at a leadership forum the management company sponsored for its clients. The speaker suggested every HOA should have one and before I left the Board, I asked about this at a meeting. The property manager said we have one through the company, but we don’t have any details and I think the Board should get some so it can determine if the coverage is adequate and if not, direct the property manager to get some bids.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

RichardP13 (California)
Posts: 3,868

Posted:

Shelia

Purchasing Fidelity Insurance should be covered in your Association's CCRs under the Article for Insurance.

KarleneT (Ohio)
Posts: 1

Posted:

I am the treasurer of our Association and have been for over 8 years. The other board members come and go, but I remain the constant.
1. Yes
2. Yes, I use QB Premier
3. Yes,
4. Download from Bank Website
5. Yes, and mobile deposit and website
6. Me, using QB
7. Self managed, all volunteer...had a management co once...they took our money!
8. Yes, I do, QB
8a. Yes, and audit can be called by majority vote of homeowners at any time.
Books are always open!

TimB4 (Tennessee)
Posts: 21,062

Posted:

My appreciation to those who continue to share what they do/have done as Treasurer within their Association.

CyrstalB (Maryland)
Posts: 457

Posted:

When we were being "managed", and I use that term loosely, the PM was the treasurer. BIG MISTAKE
Our state laws and our CCR's required a fidelity bond based upon the average monthly balance, and although we didn't verify, the PM had his own fidelity bond.

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