Preventing Theft of Your HOA Funds
Money, for better or worse, is a Homeowners’ Association’s (HOA’s) lifeblood. It keeps a property solvent, covers repairs and emergencies, and allows for an association to budget for upcoming years.
Though not a frequent occurrence, there have been situations in which an HOA’s funds have been misappropriated. In some circumstances, the head of the HOA has overpaid for services and then pocketed the difference. In others, they’ve “cooked the books” to make it look like there isn’t as much money available as there actually is and then skimmed off the top. And sometimes, they simply take the money and run.
There are some simple steps that can be taken by any HOA to make sure none of these situations rear their ugly head. Here are a few.
- Every HOA should require two signatures on checks that are over an approved-upon amount of money. Some associations require two signatures for checks over $1,000 and others set a limit of $5,000. Whatever the amount, this is a good system of checks and balances.
- Whoever reviews and approves invoices shouldn’t prepare or sign the checks. If that’s the way your HOA is set up, then the checks need to be reviewed by another board member. Again, checks and balances.
- Bank statements should be available for review by all board members, and should be routinely reconciled. If there’s any discrepancy, it should be brought to the HOA’s attention immediately and dealt with right away.
These few simple steps can save enormous headaches in the long run, and add a much-needed layer of transparency to any HOA. But more importantly, they will help avert any misappropriation of funds, and ensure that the HOA has money when it’s needed most.
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