Condo Media - July 2012 - (Page 40)

FINANCE by Kenneth A. Bloom, CPA Protecting Your Association’s Assets Oversight and Due Diligence eing a condominium association board member can be far more challenging than most people assume. The wide range of issues that must be addressed is broad in scope, from maintenance to rules enforcement, building a sense of community to finance. Hopefully the following tips will help make the financial responsibilities of the job a bit easier. The most important aspects of a board member’s financial responsibilities are those that help protect association assets. A handful of procedures can be performed that significantly help board members fulfill their responsibilities without being overwhelming, and these procedures can significantly reduce the possibility of misappropriation of assets. the June 30 bank statement will not show that check until it clears several days later. In accounting lingo, that condo fee check is called an “Outstanding Check” on the June 30 bank reconciliation. A bank reconciliation should be prepared every month for every bank account and should have the following elements: • The ending cash balance per the bank statement. • All deposits and checks written that cleared the bank during the month. • All checks deposited and written that did not clear the bank account during the month. • The cash balance per financial statements. • The actual bank statement for the month. Now that you understand the sections of a bank reconciliation, let’s review what to look for, to make it a useful management tool. • ALL checks written should be accounted for. It is important to look at check numbers and make sure that checks are issued in sequence, and that no check numbers are unaccounted for (including voided checks). • Review dates that checks are written, names of vendors and amounts. Ask questions if checks are written to vendors whose names you do not recognize. • Make sure there are no duplicate payments. • Review outstanding checks, and ask questions if a check(s) continues to appear outstanding (un-cashed) for more than several months. • If a check is listed as either a deposit-in-transit or an outstanding check between association accounts, make sure the transfers are properly reflected on the other account. For example, if the operating account shows an outstanding check to a reserve account, make sure the reserve account shows that same amount as a deposit-in-transit. • Finally, ask questions if any items seem to be odd, and make sure you understand the reason. B Review the Vendor List Board members should periodically review the vendor list and make sure all association products and services are provided by approved vendors. Approved vendors should have extensive experience with community associations, and therefore understand the unique needs of this industry. As a former partner used to say: “You shouldn’t go to a cardiologist for a skin rash!” It’s also generally wise to make sure that vendors are independent of board members. Use of vendors related to board members will usually raise suspicion, regardless of the actual facts. The accounting profession has strict ethical standards, and one of them says that auditors must be independent both in fact and appearance. It is wise to be aware of the concept of independence. Review Monthly Bank Reconciliations Reviewing and understanding the monthly bank reconciliation for each cash account (operating and reserves) is among the easiest tasks that can help minimize the possibility of fraud and embezzlement. Bank reconciliations explain the differences between the cash balance on the monthly financial statement and the balance on the bank statement. As odd as it may seem, balances-per-bank and balances-per-financial statements almost always differ. Think about it this way: If you use Quicken (or any other checkbook manager) and you write a check for your July condo fee on June 30, the check will not clear the bank for several days. So, on June 30, your checkbook manager will show a balance reduced by the condo fee, but Review Budget Variance Reports Monthly reporting packages should include a budget variance report, which typically shows the budget variances for the month, as well as cumu- 40 CONDO MEDIA • JULY 2012

Table of Contents for the Digital Edition of Condo Media - July 2012

Condo Media - July 2012
Contents
From the CED’s Desk
President’s Message
CAI News
CAI Regional News
Asked & Answered
Homeowner’s Corner
Financial Questions
CertaPro Painters How a Multinational Corporation Keeps it Local for Clients
Protecting Your Association’s Assets Oversight and Due Diligence
Community Association Data Released
Your Condo’s Future Planning for the Expected — and the Unexpected
Lost in Translation Statutes Allow Community Associations to Set their Own Reserve Requirements — or Not
CertaPro Painters How a Multinational Corporation Keeps it Local for Clients
Advertisers Index
Classified Service Directory

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