I have noticed a troubling trend lately. Perhaps its a sign of the serious problems in the economy throughout the country today, but I am reading more and more news articles about the embezzlement of HOA funds.
HOA boards have the fiduciary responsibility to protect the homeowner’s money and property. Along with that responsibility comes an obligation, for both the Board and management, to make sure that financial controls are in place to lessen the likelihood of embezzlement. Some examples of good financial controls for boards to adopt are:
- contract oversight
- a dual check approval process
- monthly reconciliation of bank statements
- regular audits
- fidelity insurance, which covers not only the acts of the Board, but employees, and management as well.
While some might think that some of these controls limit the flexibility of the Board to make payments, or as in the case of an audit, might be expensive, they are a valuable tool for any business, much less an HOA. Keep in mind that an HOA is in charge of thousands if not millions of dollars. Such procedures just make prudent financial sense.