Glenbrooke News

Below is a checklist of financial controls for homeowners associations - and  I wonder what candidates for the board think of it.  ( I have no idea how we are doing in this area, but presume current and prospective board members probably would).

Internal Control Questionnaire For Homeowners Associations

This questionnaire has been simplified to address the internal controls most
appropriate to a typical homeowners association. It is not intended to be comprehensive,
and may not disclose all internal control weaknesses for all associations.
A "NO" response to any question indicates a possible internal control weakness.
It should be noted that a "no" answer in itself does not necessarily constitute a significant
control weakness, because a specific weakness can often be offset by a mitigating
strength.

General controls are those that usually have only an
indirect impact on the accounting system; their contribution to
the system of internal control is to provide an environment that is
conducive to the protection of assets. They include such things
as a defined organizational structure, job descriptions for board
members, and written policy and procedures manuals. It is
easier to know what to do if it is written down somewhere!

Does the Board of Directors have a clear under standing of the
duties, responsibilities, and authority of each member of the
board?

Does the Board have written job descriptions for each member of
the Board?

Does the Board have a written manual of policies and
procedures?

Does the Board record its decisions by maintaining accurate
minutes of meetings of the Board and committees of the Board?

Does the Association have an accounting manual which
describes the items to be included in each general ledger
account?

Note: lack of an accounting manual or defined chart of accounts
can lead to inconsistent accounting treatment or misclassification
of revenue and expenses from one period to the next.
Misclassifications deter comparability from period to period,
making it difficult for the Board to comprehend financial results
and make meaningful comparisons of actual results to the
budget.

Does the Board receive prompt internal financial reports at least
quarterly?

Does the Board regularly compare actual financial results to the
budget and promptly investigate significant variations?

Does the Board regularly obtain bids for services, and document
its decision for accepting other than the lowest bid?

Does the Association have adequate security to limit access to
authorized persons? (Such security could include security
guards, locks, chain length fences, etc.)

Are physical assets, where possible, adequately sheltered to
protect against unnecessary deterioration?

Are important computer files and programs backed up at an
off-premise location?

Note: off-premise backup of important files will protect the
association from the cost of reconstruction in the event of fire,
flood or other disaster.

Does the Association have adequate insurance coverage
(including adequate fidelity bonds)?

Are bank statements reconciled by someone with no other cash
receipts and disbursements functions?

Note: "other cash functions" above include making bank deposits,
recording cash receipts, writing checks or approving checks for
payment.

Does the bank reconciler receive the bank statement unopened (to
prevent loss or alteration of reconciling items)?

Does the bank reconciler compare details of paid checks with their
entry in the cash disbursements journal?

Does the bank reconciler examine paid checks for unauthorized
signatures, alterations, or irregular endorsements?

Does the bank reconciler compare dates of deposits on bank
statements with dates of entry in the cash receipts journal?

Are checks that are outstanding for long periods of time (e.g.,
more than six months) reviewed for disposition?

Are completed bank reconciliations reviewed and approved by the
Board of Directors?

Are accounts receivable listings aged to identify seriously
delinquent accounts?

Are delinquent accounts pursued for collection in a timely
manner?

Does the Association have a written collection policy, and has it
been sent to all members?

Are liens filed in a timely manner to enhance collectibility of
overdue accounts?

Are bad debt write-offs reviewed and approved by the Board?

Are member and other checks received by the Association
restrictively endorsed (i.e., stamped "for deposit" to the
Association) immediately after the mail is opened?

Are cash receipts deposited intact, daily?

If Association is on an accrual basis for internal bookkeeping, are
subsidiary ledger accounts periodically reconciled to the general
ledger?

Does the Association use prenumbered checks and are they
issued in numerical sequence?

Are checks only prepared on the basis of a properly approved
invoice or check request?

Are invoices and bills from suppliers and vendors checked for
mathematical accuracy and proper pricing prior to payment?

Are invoices verified as to proper account classification in the
Association's general ledger?

Are invoices stamped "Paid", or perforated, or clearly marked in
some way to prevent a duplicate payment?

Do all operating checks require dual signatures, and is at least
one of these the signature of a Board Member?

Do all payments from reserve accounts require dual signatures
including either two Board Members or one Board Member and
one Officer?

Does the Board Member who signs operating checks examine
invoices or other supporting documentation at the time the checks
are signed?

Does the Board have a policy of never making checks payable to
cash?

Does the Board have a policy of never presigning blank checks?
Are signed checks mailed without allowing them to return to the
person who prepared them?

Do different people do the following:
A. Approve hours worked as recorded on time cards?
B. Prepare paychecks?
C. Distribute paychecks?

Are adequate personnel records maintained, including
employment applications, W-4 forms, performance reviews, and
approvals for pay increases?

Are written approvals required before someone can be added or
deleted from the payroll?

Are records maintained of available benefits, e.g., unused
vacation, sick days, etc?