TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
What internal financial controls are indispensable, e.g. 2 check signers, board approval of invoices, no use of debit card, etc.?
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Most important internal financial controls?
Started by TerriS6 • 9 replies • 172 views
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TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
I don't really see the need for 2 check signers. Most Associations order checks with just one signature line and banks only require one signature which they don't bother to look at unless someone complains about a check.
That said, my last Association had a two check signature requirement. I ordered checks with the two signature lines. It was often a pain to coordinate obtaining signatures. Often, if someone was going out of town, a few blank checks would be signed by one individual so the second individual could pay bills as needed.
If you are going to keep a two signature requirement, I would not insist on specific signers (like the treasurer shall sign all checks and the President shall co-sign). Instead, simply have all board members on the signature card at the bank and any two directors/officers can sign.
I would always insist on the Board approving expenditures.
I agree that a corporate credit/debit card can be handy but causes potential risk - hence, I wouldn't have one (my opinion might have to change on this in the future as we move away from cash on more to electronic payments).
That said, my last Association had a two check signature requirement. I ordered checks with the two signature lines. It was often a pain to coordinate obtaining signatures. Often, if someone was going out of town, a few blank checks would be signed by one individual so the second individual could pay bills as needed.
If you are going to keep a two signature requirement, I would not insist on specific signers (like the treasurer shall sign all checks and the President shall co-sign). Instead, simply have all board members on the signature card at the bank and any two directors/officers can sign.
I would always insist on the Board approving expenditures.
I agree that a corporate credit/debit card can be handy but causes potential risk - hence, I wouldn't have one (my opinion might have to change on this in the future as we move away from cash on more to electronic payments).
TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
Thank you, Tim. As our budget is smallish, if the board is approving invoices in advance, there shouldn't be a need for two signatures. Also in California, the board is required to review financials monthly so that should be adequate. And for a community our size, any transfers greater than 5% of the annual assessments have to be approved in writing by the board. One association writes a resolution on first day of fiscal year naming in advance known payments in that category like insurance.
CathyA3 (Ohio)
Posts: 6,299
Posts: 6,299
Posted:
Don't forget the importance of reviewing the monthly financials. All three of our board members do so, and we ask questions if we don't understand something.
CathyA3 (Ohio)
Posts: 6,299
Posts: 6,299
Posted:
Also, past boards in my community have allowed our manager to spend up to $500 without getting board approval. So of course $500 crept up to $1000 over time. I think this practice invites abuse, although there may be a few situations in which it would be OK. But you'd need to have a lot of well-deserved trust in your manager.
Boards can't control spending unless they actually do control the spending.
Boards can't control spending unless they actually do control the spending.
TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
Thanks, Cathy.
TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
I read that effective this year in Florida, it's illegal for an association to pay with debit card.
DavidF17 (Florida)
Posts: 11
Posts: 11
Posted:
The most important financial control is an honest, diligent Treasurer. A good Treasurer is much more important than audits in my opinion because the Treasurer will look at every transaction while an auditor will only look at a subset of transactions. I've been involved in 4 audits and none added any value beyond the perception that all was well. No auditor reported any problems while I found problems every month, most of which were minor.
The attached Word document outlines the process I use, which was developed from the recommendations of a CPA who specialized in HOAs.
I also automated some of my work using Excel macros, which saves me tons of time. I taught myself how to write macros entirely because of my work as Treasurer.
The attached Word document outlines the process I use, which was developed from the recommendations of a CPA who specialized in HOAs.
I also automated some of my work using Excel macros, which saves me tons of time. I taught myself how to write macros entirely because of my work as Treasurer.
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TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
Thank you for that.
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
Quote:
Posted By TerriS6 on 10/28/2024 4:52 AM
What internal financial controls are indispensable, e.g. 2 check signers, board approval of invoices, no use of debit card, etc.?
What internal financial controls are indispensable, e.g. 2 check signers, board approval of invoices, no use of debit card, etc.?
I would assume that person(s) can circumvent any internal controls you have in place and pay an external company to HOA whole if it occurs.
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