bYOU SHWhether you are aware of them or not, HOA bank statements are a necessary tool in assessing the financial health of your organization. But, for many people, understanding bank statements is an uphill battle. Here is everything you need to know about HOA bank statements.
In this article:
- What Are HOA Bank Statements?
- Why Is It Important to Check HOA Bank Statements?
- What Is Included in an HOA Bank Statement?
- Who Should Review Bank Statements of an HOA?
- How Often Should Bank Statements Be Checked?
- How Do I Get an HOA Bank Statement?
- What If There Is a Discrepancy?
- Better Your Community, Review Your Statements
What Are HOA Bank Statements?
HOA bank statements, also known as statements of account, are just as they sound. It is a statement from the bank showing all deposits and withdrawals from each association account over a certain period of time. The most effective way to prevent fraud within your community association is to keep a close eye on bank statements.
Most associations have at least two accounts: an operating account and a reserve account. The operating account is for regular costs of running a community association, while the reserve accounts for setting aside funds for future projects.
Reviewing bank statements on a regular basis is important because it is one of the few financial documents that is not prepared by the association board of directors or the HOA management company. Comparing bank statements with association financial statements is a good way for other HOA members to check the accuracy of financial statements prepared by the manager and/or treasurer.
Why Is It Important to Check HOA Bank Statements?
It is important to carefully review every transaction to prevent potential fraud. One of the most common ways fraud is committed is by “borrowing” money from a long-term reserve fund and returning the money after a time, essentially taking out a loan using association funds. This is common because of how hard it is to track. If all funds are accounted for in the long run, nobody would know unless they inspect each individual transaction.
What Is Included in an HOA Bank Statement?
A proper bank statement should include a timeline of all deposits and withdrawals into and out of association accounts. Each account should have its own statement. Here are some things you will find in your HOA bank statement:
- Account name and number
- Statement period
- Beginning balance for the period
- Deposits, including checks, e-deposits, direct deposits, credits, etc.
- Withdrawals, including payments (auto or not), electronic transfers, ATM withdrawals, over-the-counter withdrawals, bank fees, etc.
- Interest earned
- Ending balance for the period
Your bank statement should also include instructions on how to report fraudulent activity or errors in your statement. If you find errors you can’t reconcile or suspect fraud, contact your bank immediately. Typically, banks only give you 60 days to report such anomalies. Otherwise, your bank will assume the amounts are correct.
Who Should Review Bank Statements of an HOA?
Only a few people should have access to association funds. Usually, it is just the president, treasurer, and/or your property management company if you choose to use one. This leaves a lot of power in the hands of a few. If left unchecked, it could be an opportunity for fraud. It is important that all bank statements be sent to someone other than the member(s) who have the ability to write checks. That way, they can act as an impartial inspector to make sure that nothing is missing within the HOA accounts.
How Often Should Bank Statements Be Checked?
Bank statements should be included with all other financial statements prepared at the interval as determined by your HOA whether it be monthly, quarterly, or annually. Ideally, you should check a bank statement as frequently as possible. Some banks offer online HOA bank services that allow for 24/7 access to association account statements.
If you are unsure of how frequently to check your bank statements, look to your governing documents or state laws. You may have provisions mandating how often you must perform an inspection. For instance, in California, according to the Civil Code §5500, an HOA board must review its bank statements on a monthly basis.
How Do I Get an HOA Bank Statement?
Understanding bank statements is the hard part, but requesting for one is much simpler. There are a couple of ways you can get your hands on your HOA bank statement. Some banks automatically send monthly statements by mail. But, if your bank does not do this, you can always head there yourself to request a copy on the day.
Another way to see your HOA bank statement is to sign up for paperless statements. When you do that, you will stop receiving statements by mail. Instead, you can log on to your HOA bank account online and view your statement there. You can even download your statement — just make sure you save it in a secure location. This comes free of charge, of course.
What If There Is a Discrepancy?
Regular reconciling of your HOA bank account with your financial reports is a surefire way to prevent fraudulent activity. Just make sure that all financial transactions appear on both records. If your HOA statements match your own records perfectly, then you have nothing to worry about. However, if there is a discrepancy, you must take a deeper look.
Before suspecting illicit activities within your organization, you must first look into the clearing date. Some deposited or issued checks may not have cleared in the bank yet, which is why you can’t find them in your HOA bank statement. These are considered “in transit.”
Bank reconciliation ensures your HOA’s money is well accounted for. If you see a difference, make necessary adjustments in your HOA bank statements to balance them out with your financial reports. Make sure each difference comes with an explanation. You will have to work with your bookkeeper or manager to accomplish this task.
Better Your Community, Review Your Statements
It is imperative to review all your financial documents, including the HOA bank statements. By doing so, you can get a solid grasp of your association’s financials and ensure all your money is accounted for. It is also a good way to stay alert of any fraudulent or potentially fraudulent acts. If you suspect anything, gather your board of directors to discuss the issue. You may also want to involve your HOA’s bookkeeper and manager. It is important to address the issue head-on to combat fraud in your HOA.
Financial management can be one of the toughest aspects of operating a successful HOA. This is why most associations choose to outsource the service or have a professional on retainer. If you have questions regarding financial statements or looking for advice, contact our team of experts. We are just one call away!
- How To Choose The Right Bank For An HOA
- Why Is It Important To Practice Budget Transparency In Your HOA?
- Closing The Books? Use This Year End Checklist