It's the calendar year-end which means boards must be in the mindset of planning financially for the upcoming year. Financial statements need to be prepared as well as new budgets. This is also a good time to start thinking about what internal controls your association has in place to protect you from fraud and waste.
Here are some tips gleaned from the Guide to Homeowners' and Other Common Interest Realty Associations (a publication widely used by accounting professionals):
Ask yourself these questions about your association's current financial practices:
1. Is the bank immediately notified of all changes of authorized check signers?
2. Does the association require dual signatures on withdrawals from reserve funds?
3. Are all employees handling cash bonded?
4. Are checks restrictively endorsed "for deposit only" by the individual who opens the mail when received?
5. Are receipts (checks and currency) deposited intact on a daily basis?
6. Does the association use a lockbox or electronic transfers to collect assessment revenue?
7. Do adequate physical controls exist over cash receipts from the time of mail opening until the time of bank deposit?
8. Are monies designated for future repairs and replacements deposited to separate bank accounts?
9. Is access to computerized cash receipts records limited to those with a logical need for such access?
10. Are checks prenumbered and used in sequence?
11. Are controls over unused checks adequate?
12. Prior to checks being prepared are the following compared: (i) purchase order (ii) receiving report (iii) vendor invoice?
13. Do only persons authorized to prepare checks have access to blank checks?
14. Are checks made payable to specified payees and never to cash or bearer?
15. Are all check numbers accounted for?
16. Are voided/spoiled checks properly mutilated (signature portion removed) and retained?
With some associations handling operating budgets in the millions of dollars, these are just a few of the questions your board should be discussing as you plan for another year of "doing business". I'll give you more financial food for thought throughout this week.
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