Financial Safeguards for our Homes Association
THIS IS A REPORT FROM OUR ACCOUNTANT REGARDING FINANCIAL SAFEGUARDS IN PLACE AT WELLINGTON GREENS. Submitted January 17, 2019
Recently, a resident asked the Board of Directors what type of internal controls they had in place to protect the HOA funds that are collected and used for expenses from the 277 residents of Wellington Greens Home Association. I was asked to explain the measures taken to ensure that the funds are used appropriately for the benefit of all of the HOA’s residents and that the proper internal controls are in place. Here is a detailed explanation of the process currently used by Wellington Greens:
Vendor bills are received, reviewed, and approved by Nick Horvath.
Once the vendor bill is approved for payment, the bill is given to the current board treasurer, Mike Behne, to issue a check to the vendor. The treasurer is in control of the checkbook at all times and keeps it in a secure and locked cabinet when not in use. There are three signers on the Wellington Greens checking account which are all members of the board – Linda Siedhoff, Lon Dyer, and Mike Behne. If the treasurer is out of town, the checkbook is given to Don McIntyre who will then write the checks during the treasurer’s absence and request that either Linda or Lon sign the checks. Upon Mike’s return, the checkbook is returned to him.
The vendor checks are recorded on the check register, assigned a G/L cost account code and given to an independent accountant, Professional Accounting Services, on a monthly basis to enter into their accounting software. The accountant’s computer is protected with extensive security features and uses anti-virus software to protect the integrity of the information contained within the computer.
The accountant prepares and emails or mails the 277 resident dues statements at the beginning of each month using their accounting software.
The accountant collects and records the payments into the accounting software and deposits the funds into the Wellington Greens checking account at Pinnacle Bank. The accountant does not have access to the bank account other than to make deposits into it.
The accountant then requests a monthly bank statement from Mike Behne who has online access to the checking account.
The accountant reconciles the deposits made and vendor checks written during the month against the check register and questions the Board regarding any vendor checks that vary from the regular, recurring monthly vendor bills such as electricity, water and garbage disposal. This is not in any way an all-inclusive list as there are several monthly recurring bills.
Any checks written to non-recurring vendors, examples of which are those vendors who perform services such as the construction of the maintenance building, the clubhouse remodel project, or extensive repairs are questioned by the accountant. However, in most cases, the board has informed the accountant that these expenses will be upcoming and gives the accountant an estimate of the total expense as well as the vendors who will be providing the services. The accountant will then request a completed Form W-9 from the vendor to be used for tax purposes at the end of the year.
Once the bank reconciliation is completed and all vendor related questions answered, the accountant prepares five monthly financial statements which are given to the Board of Directors. These financial statements include:
Year-to-date profit and loss statement with a comparison to the year-to-date budget
Current month profit and loss statement
Balance sheets which compare the current period end date to that of the same period in the prior year
Year-to-date and current month profit and loss statements which compares these numbers to that of the same period in the prior year
Current accounts receivable report of monies owed by residents at the time of the monthly board meeting
At the end of each fiscal year, the accountant compiles extensive work-papers which tie out each balance sheet account. These work-papers are provided to a CPA to review and then prepare the yearly tax return and sign a compilation report. The compilation is given to all residents at the annual meeting in October.
The Finance Committee and Board Treasurer prepare the upcoming fiscal year budget which if approved by the Board and is discussed at the annual meeting, also provided to the accountant.
Each of these items ensures that there are controls in place to safeguard the funds collected and expensed on the resident’s behalf – specifically the segregation of duties for the various accounting functions. Your Board of Directors want to make sure that you feel protected against any type of theft that could possibly occur. If you have any additional questions or concerns, please feel free to reach out to me at 402 525-5383 or e-mail me at barbgeiger3@gmail.com.
Barb Geiger, CPA
dba Professional Accounting Services
