Q -What are some general procedures that an Association can implement to protect its financial resources?

Q - What are some general procedures that an Association can implement to protect its financial resources?

A – An Association should have a reasonable set of “internal controls” for their finances. Internal controls are policies and procedures that govern how monies are received in and paid out. If the controls are strong enough, it becomes very difficult for someone to subvert funds away from the association. No internal controls, however, are perfect and the board of directors and the manager of an association must always be diligent in reviewing financial matters to ensure the integrity of the association’s funds. Below is a list of “Ten Commandments of Internal Controls” that I believe should be the minimum standard for Associations:

The Ten Commandments of Internal Control for Your Association

Thou shalt not sign blank checks, nor leave blank check stock unsecured.

1. Thou shalt deposit all checks in a timely manner (preferably daily). If a deposit is not made daily, then the undeposited funds should be adequately secured.
2. Thou shalt not accept cash. If absolutely necessary to accept cash, then do so only with 2 witnesses, then generate a receipt for the files.
3. Thou shalt not make checks payable to “Cash”.
4. Thou shalt require invoices, or other type of verification of the expense, on all paid bills. That invoice should be “canceled” in some manner after payment to avoid duplicate payment.
5. Thou shall have two board signers on reserve withdrawals. Thou shalt not allow telephone withdrawals of reserve funds.
6. Thou shalt update signature cards in a timely manner whenever there is a change in board members or change in management personnel. The board may want to consider having a board member deliver/mail the signature cards to the bank.
7. Thou shalt require approval of write-offs of A/R balances by a person other than the person making the deposits and reconciling the bank statements. The board shall approve all write-offs over a certain amount.
8. Thou shalt review all bank statements and reconciliations at least quarterly for ALL bank accounts - including certificates of deposit.
9. Thou shalt receive financial statements at least quarterly (monthly, is even better).

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