Thanks to the Maryland Homeowners Association – a volunteer group similar to the Connecticut Condo Owners Coalition, except they have been in operation for more than 10 years:

To strengthen good governance in your community, MHA recommends that your board put in place a number of best practices designed to provide greater administrative transparency and accountability over daily operations.  When such services are contracted via a management company, the Board remains the legal entity that ultimately is held responsible for fiscal mismanagement, such as accounting lapses and/or poor bookkeeping.  Board members should be diligent about the following:

• Require the Board Treasurer to hold the management company accountable for the daily business operations of the association.  A treasurer’s report to the Board should include the specifics of income, expenditures, contractual bids and services rendered.  Financial transparency is increased when Board and association members review and/or modify the terms and provisions of the management company’s agreement.
  

• Since e-accounts now have images of the actual checks written, a board member should view these checks electronically and compare them against the figures in the Board Treasurer’s monthly reports. Verify if the required dual signatures policy (presumably the signatures of a manager and a board member), for any expenditure of association funds is indeed being followed.
  

• No one person should have sole control of association funds. Checking accounts, certificates of deposit and reserve funds need to have built-in safeguards, for example, rules for the processing of transfers and withdrawals. . If co-signing checks is inconvenient, one or more board members should have electronic read-only access to all association accounts.
  

• Require the bank to send a duplicate monthly statement directly from the bank to the Board Treasurer so that the treasurer can compare the bank’s figures against those in the monthly report from the management company.
  

• Require a Board member, other than the Treasurer, to periodically compare invoices against checks paid.
  

• Before submitting Income Tax returns, consult an independent Certified Public Accountant (CPA), and get a yearly audit report.  The association board should select the CPA rather than have the management company make the selection. Require the CPA/Auditors to submit audit report findings directly to the Board.
  

It’s hard to believe that a neighbor or professional manager could mismanage association funds but it does happen.  Installing safeguards can add to the financial stability of your community.  Tracking transactions, reviewing reports and examining contracts rank high on the best practices list.

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