HOA Finances: Controls and ProtectionA good property management company can prevent fraud and misappropriation within your HOA by opening proper custodial trust accounts. Find a local bank that is chartered in the state. You need an actual office and not a bank that’s out of state. The reserve account should be a savings account. You don’t want checks to easily transfer back and forth from that account. With our reserve accounts, there are no transactions except by and between the operating and reserve account. It’s a
HOA Finances: Handling Checks, Cash, and AccessCheck handling duties and cash handling duties need to be
Access to your bank accounts should be restricted, but HOA board members should have view access. You don’t want the boards to have check writing privileges without the agent, but current board members should be able to view the bank accounts. It will help you notice unauthorized transactions.
HOA Finances: Lockboxes and Electronic ChecksBank lockbox processes need to be in place. If your HOA still predominately operates by writing checks, the lockboxes should be secure. It could be a lockbox or an onsite scanner so your agent can scan checks. There should be a shredding policy if paper checks are being used. This is an important security protection. ACH processing is always preferred. Electronic processing of dues and fees is more secure. You don’t want things
HOA Finances: Positive PayPositive pay is when the management company or the agent writing the checks uploads separately to the bank a list of all the checks that they have written, with the check numbers. The bank looks at that and makes sure there aren’t checks being cashed that aren’t on the list. You’re sending the bank all this information so they can help you keep everything in order. It will flag unauthorized transactions.
Remember that bookkeepers and property managers should not have the same privileges. They should not sign checks. Typically, HOA management companies will have a property management bookkeeper and a corporate bookkeeper who takes care of audits. You want a separation of power and authority so one party doesn’t have too much control.