Whether you’re a seasoned homeowner or new to the world of community associations, understanding HOA bank statements is crucial for assessing the financial health of your organization. In this article, we’ll break down everything you need to know about HOA bank statements to ensure transparency and prevent fraud within your community.
What Are HOA Bank Statements?
HOA bank statements, also known as statements of account, provide a comprehensive overview of all deposits and withdrawals from each association account over a specific period of time. These statements are crucial for identifying any irregularities or discrepancies and ensuring the accuracy of financial statements prepared by the association.
You are viewing: Understanding HOA Bank Statements: A Guide for Homeowners
Most associations have at least two accounts: an operating account for regular expenses and a reserve account for future projects. Reviewing bank statements is particularly important because they are prepared by the bank, not the association or management company.
Why Is It Important to Check HOA Bank Statements?
Checking HOA bank statements regularly is essential to prevent potential fraud. One common method of fraud is borrowing money from the reserve fund and returning it later, essentially taking out a loan using association funds. This practice is difficult to track unless individual transactions are inspected. Careful review of bank statements can help detect and prevent such fraudulent activities.
What Is Included in an HOA Bank Statement?
A proper bank statement should include the following information for each association account:
- Account name and number
- Address
- Statement period
- Beginning balance for the period
- Deposits (checks, e-deposits, direct deposits, credits, etc.)
- Withdrawals (payments, electronic transfers, ATM withdrawals, bank fees, etc.)
- Interest earned
- Ending balance for the period
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Bank statements also provide instructions on how to report fraudulent activity or errors. If you encounter any discrepancies or suspect fraud, it is important to contact your bank immediately.
Who Should Review Bank Statements of an HOA?
Access to association funds should be limited to a few key individuals, such as the president, treasurer, and/or property management company. To ensure accountability and prevent potential fraud, it is crucial to have bank statements sent to someone other than those who have the ability to write checks. This impartial inspector can verify the accuracy of the HOA accounts and act as a safeguard against misappropriation of funds.
How Often Should Bank Statements Be Checked?
Bank statements should be reviewed at the same intervals as other financial statements prepared by your HOA, whether monthly, quarterly, or annually. Ideally, you should check bank statements as frequently as possible. Some banks offer online HOA bank services that provide 24/7 access to association account statements.
Check your governing documents or state laws to determine how often inspections are mandated. For example, in California, HOA boards must review bank statements on a monthly basis according to Civil Code §5500.
How Can Homeowners Obtain HOA Bank Statements?
Obtaining HOA bank statements is relatively simple. Some banks automatically mail monthly statements, but if yours does not, you can visit the bank and request a copy.
Alternatively, you can opt for paperless statements, which allow you to view and download your HOA bank statement online. This service is often free of charge, providing easy access to your financial information while reducing paper waste.
What If There Is a Discrepancy?
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Regular reconciliation of your HOA bank account with your financial reports is crucial in preventing fraudulent activity. It is essential that all financial transactions appear on both records. If your HOA statements match your own records perfectly, there is nothing to worry about. However, if you notice a discrepancy, further investigation is needed.
Before jumping to conclusions about illicit activities, consider the clearing date. Some checks may not have cleared in the bank yet, which is why they may not appear on your HOA bank statement. These transactions are considered “in transit.”
Bank reconciliation ensures that your HOA’s money is accurately accounted for. If you discover a difference, work with your bookkeeper or manager to make necessary adjustments in your HOA bank statements. Each difference should come with an explanation to maintain accurate financial records.
Better Your Community, Review Your Statements
Reviewing HOA bank statements is integral to gaining a solid understanding of your association’s financials and ensuring the safeguarding of funds. It is also a crucial step in detecting and addressing potential fraudulent acts.
Financial management can be challenging, which is why many associations opt to outsource these services. If you have questions about financial statements or need advice, don’t hesitate to reach out to our team of experts. We’re here to help!
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