As Board Members you have more than likely heard the term fiduciary duty more than you care to remember. However, fiduciary duty is of the utmost importance, especially as a Board Member. As a fiduciary your obligation to the association is to act in the best interest of the association, show good faith and act diligently. Association management companies and Community Association Managers also have a fiduciary duty to the association and Board of Directors.
Most Board Members take their roles as community leaders seriously with integrity and understand their responsibility to the association. The same can be said for association management companies and Community Managers.
Unfortunately, there are and have been individuals that represent these groups with little or no semblance of integrity. Theft of association funds is on the rise. We’ve all seen news reports that detail misappropriation of funds, a management company closing after funds from several associations disappeared and Board Members who make off with the Associations reserve funds.
We all say that it won’t happen to us, yet fraud, embezzlement and other methods of theft happen daily to both individuals and companies alike. And homeowner’s associations are no exception
Community Association Management’s Leadership Team knows first-hand how important it is to ensure that the appropriate financial controls are in place. Business processes, rigorous controls along with checks and balances are all things I believe in strongly. I’m proud to say that Community Association Management has taken, and continues to take, the steps necessary to ensure that your association and its funds are protected. Below are just a few of the ways we protect your association funds:
- Periodically we have an independent third party auditor come in and perform an SSAE 16 audit of our systems, controls, and processes to ensure that there are enough checks and balances in place to protect our clients. Some of these controls include:
- Computer Security groups that restrict the user’s ability to change or see information that is not relevant to their assigned duties,
- Strong encrypted passwords and passwords forced to be changed every 90 days,
- Electronic Audit trails (who did what, and when)
- Criminal and credit checks on all employees at time of hire, and periodic background checks of existing employees
- Segregation of duties – For example:
- person who opens mail doesn’t enter invoices,
- person who enters invoices can’t setup vendors
- person who enters invoices doesn’t write checks
- person who processes homeowner payments (AR) doesn’t handle accounts payable (AP)
- person who reconciles bank statements can’t write checks
- person who writes checks does not have signature authority on checks
2. Required electronic approval of invoices by your portfolio manager/association coordinator before any invoices are available to be paid in the system.
3. Ability for boards to electronically approve invoices before invoices can be paid
4. Two manual signatures required on checks over set dollar amounts
5. Our system is linked directly to the bank so we can see on a daily basis the bank balance and the associations ledger balance.
6. We utilize “Positive Pay” with our bank to minimize the possibility of forgery or alteration of association checks.
7. Daily electronic reconciliation of all of the bank accounts we manage.
8. We also include the Association Bank statements and bank reconciliation reports in the monthly financial statements to your board.
9. We encourage Associations to have a full independent CPA audit done yearly, or at a minimum every two to three years.
10. We will be happy to provide any banking verification information at any time it is requested by an authorized board member.
11. Our Portfolio Managers are required to be licensed through Community Association Institute (CAI), and are subject to rigorous ethic and professional standards.
12. We carry a Fidelity Bond of $3 million dollars to protect our clients should the unthinkable happen.
It is my job to ensure that Community Association Management continually strives to provide superior service, exceed your expectations and continue to earn the trust that you have shown, and hopefully will show in us. Should you have any questions, feel free to contact us and we will be happy to help.
We’ve also created a free e-book on Protecting Your HOA from Fraud and Financial Crimes to provide additional ways to protect your association funds. This is a must read for every HOA Board Member.
Make sure you take a look at the other helpful white papers and resources we’ve made available for HOA’s and Condominium Associations!