THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, November 11, 1995 TAG: 9511090253
SECTION: REAL ESTATE WEEKLY PAGE: 34 EDITION: FINAL
COLUMN: COMMON GROUND
SOURCE: G. ROBERT KIRKLAND and MICHAEL INMAN
LENGTH: Long : 107 lines
Q. As the recently elected treasurer of my association I am concerned that I do every thing that I should to protect the funds of the association.
We have a management company and seven board members. What steps should I take to make sure that the money we have is safe?
A. These are the steps that you have to take and the ones you should take combined into one checklist.
Make sure that all prior signers on the various accounts are removed from the bank records as authorized signers.
Have the current signers sign new cards and return them to the bank. This should be approved by a motion or resolution of the board.
Call your insurance agent and make sure that the fidelity insurance or bond is current and adequate to cover the money you have in the bank plus three months assessments. If your manager has fidelity coverage, make sure that the policy is current and that you have a copy of the policy.
Have all checks require double signatures. We recommend that at least on board member and the manager sign all checks. The board members authorized to sign are usually the president and treasurer. Do no allow wire or telephone transfers.
Require all checks to be accompanied by the original invoice when presented for payment. Also both the manager and board member should initial the invoice indicating approval for payment.
Require the manager to have prior approval before expending funds over a set limit. This is often $500, but set it where you are comfortable. This should not apply to legitimate emergencies.
Have the monthly accounting reports prepared on an accrual basis, not cash. The latest standards from the American Institute of Certified Public Accountants recommend that the books be kept with the fund balance basis. This reflects income and expenses as to their ultimate purpose.
Find a good accountant and stick with him or her. The longer the accountant is with you, the more likely they are to notice anything out of the ordinary. Discuss with your accountant the different levels of service she can provide.
These levels are a compilation, a review or an audit. The accountant can help you decide what best suits your needs. Some documents require to have an annual ``audit,'' therefore to do anything less would require you to amend your documents.
Do not allow your money to be commingled with the funds of other associations. This happens when the manager uses a general clearing account in which all monies are deposited and all bills are paid for multiple properties. This arrangement makes cosigning checks impossible and had the highest potential for abuse.
While there is no current legal prohibition in Virginia against this practice, according to David DesRoches, CPA of DesRoches & Co., ``Accountants providing services to community associations discourage the practice of commingling association funds.
``If your funds are commingled with the funds of any other organization, the monies should be in a trust account, with clearly defined safeguards. The association must assure itself that the ownership of such commingled funds is beyond the reach of the manager's or anyone else's creditors, and the interest earned on such monies is pro-rated to the association.''
Do not amend the budget by moving money among categories. A budget is a planning tool and by not amending it to make it balance, you will know where you started and where you ended up, good or bad.
Do not allow anyone other than authorized board members or the manager to charge items on an association account. This means no committee member, maintenance employee, life guard, etc. should be able to buy anything without an authorized purchase order.
No one other than the president, treasurer and secretary should sign contracts on behalf of the association and then only after a resolution of the board has authorized them to do so.
If you are not certain about any time, invoice, check or money, investigate. Do not make accusations, simply review the information and determine the facts.
As the treasurer you are the custodian of the funds of the association, while you can delegate the authority to others to perform certain tasks such as bookkeeping you cannot delegate the responsibility.
As with any program use common sense in applying the various steps, but do not ignore or standby when there are problems. This is a situation of better safe than sorry.
Every time we hear of misappropriation of monies, it is always to due to someone's dishonesty and a lack of fiscal control. Play it safe and the opportunities for anything to happened will be substantially reduced. MEMO: G. Robert Kirkland, president of a Virginia Beach property management
consulting firm, and attorney Michael A. Inman specialize in Virginia
community association issues and are affiliated with the Southeastern
Virginia chapter of the Community Associations Institute. Send comments
and questions to them at P.O. Box 446, Virginia Beach, Va. 23458. To
submit questions by phone, call 486-7265; by fax: 431-0410.
ILLUSTRATION: SAFE MONEY TIPS
Remove old check signers.
Approve new signers.
Require double signatures.
Require checks and invoices.
Require approval over a set amount of funds.
Base monthly accounting on accrual, not cash.
Find a good account and stick with him or her.
Don't commingle funds.
Don't move money among categories.
Authorized charges only.
Review any uncertain expenditures.
by CNB