People naturally want to have control over aspects of their life and this is especially true when it comes to money. Boards are made up of people and so boards also want control over money and for good reason they have a fiduciary responsibility to the owners that elected them. If the Board does all the work themselves is that better control than having a company do the financial management? In this post we’ll discuss 7 ways condo and HOA boards maintain control with financial management.
Having a board member, say the Treasurer, do all the financial tasks for the association can feel like the ultimate control but is it? If another Board member is not providing proper checks and balances, if the financial reports are not timely, if there is no transparency the internal controls (or lack thereof) are not providing better “control” over association funds.
State of the art systems are available today by a third party Financial Management Company like Community Financials that improves real control for a community Board. Online systems provide transparency, increased control and enhances owner trust.
7 Ways Condo and HOA Boards Maintain Control with Financial Management:
1 Payments Go Directly to The Bank: Payments made online and mailed checks sent to a lockbox go directly into the community’s bank account. Sometimes owners drop off checks or mail them to the Treasurer who has to fill out deposit slips and make numerous trips to the bank. This process can hold up deposits, may not allow for charging late fees and checks can get misplaced.
2 View Bank Accounts Online: Do all Board members currently have access to view your operating bank account? Can you see deposits and withdrawals and run prior period statements? This transparency not only improves internal controls but also promotes trust among board members. In addition to the operating account all Board members can also see the reserve account(s).
3 Two Board Member Bill Approval Before Payment: Our online bill approval system requires two Board members (with their unique login) to review all invoices and approve them prior to payment. Only bills that have been approved by both Board members will be paid. This enhances checks and balances.
4 Two Board Member Approval for Reserve Account Transfers: For funds to be moved from the reserve account to an operating account, to pay for capital project invoices for example, Community Financials requires this request be in writing by 2 board members.
5 Financial Reporting: Timely and accurate financial reports provide control. Some communities we speak to do not get financial reports frequently, they do not get a lot of information, when they do get them they may have errors. Timely financial reports are a tool to control association funds. The comparative income and expense report shows a variance of actual costs versus budgeted costs and is great for spotting expense irregularities. Similarly, a bank reconciliation report helps prove that what you have in the reports is what is in your bank accounts (for more information on these reports see our Best 4 Financial Reports).
6 Direct Access to Accounting Software: As a Board member do you currently get access to the software where your community data is stored? Do you have a library of prior financial statements you can view online? We offer the two market leading community management & accounting software used in the industry: Caliber and TOPS ONE. In Caliber Boards can see up to the minute aged delinquencies, view the closed period financial reports and share them with owners. For TOPS ONE, we provide Board members a login into the software so they can see information and run reports themselves as well as see and share closed financial reports with owners.
7 Administrative Mailings to Owners are Approved Prior to Sending: Besides the mailed statements and late letters, written correspondence to owners in the form of our welcome letter or annual meeting notices are reviewed and approved by a Board member prior to sending.
Our processes allows the Board to maintain control, in many cases improve control, but give up doing many of the manual handling of payments, entries and answering owner questions. What’s more owners feel more in control if they get statements in timely manner, can view their account and payment history online, get timely answers to accounting questions and can view community documents online (those approved by the board).
To discuss how to improve financial controls at your community feel free to email us or schedule a call.