Academy/Banking, Cash & Internal Controls
Monthly financial review
A repeatable monthly check that catches errors and fraud before they compound.
A monthly financial review means reconciling the bank statement, reading it line by line, and comparing budget to actual, done by someone other than the person who signs checks. Route the statement to a board member first, not the treasurer, so a dishonest signer cannot intercept or alter it before anyone else sees it.
What the review covers
A monthly review is two habits, not one glance at the ending balance. First, reconcile the bank statement against the association's own records line by line. Second, compare what was actually collected and spent against the budget. Skipping either one leaves a gap an error, or a person, can hide in.
"Monthly bank reconciliations and routine review of cash activity are also key detective controls that can help identify errors or unusual transactions in a timely manner."
Source: Safeguarding HOA Funds: Best Practices to Prevent Fraud and Theft, McKonly & Asbury LLP
Who sees the statement first
The person who reviews the statement should not be the same person who reconciles it, signs checks, or holds the checkbook. A property-management fraud-prevention guide puts it plainly:
"The person who signs checks should not be the same person who reconciles bank statements and receipts."
Source: HOA Fraud: A guide to detection and prevention, FirstService Residential
One way boards apply this: route the monthly statement to a board member who is not a check signer, before it reaches the treasurer. That way, if a signer is dishonest, they get no head start on intercepting or altering what the board is about to see, an approach an HOA embezzlement-prevention checklist from Mulcahy Law Firm also recommends alongside a two-signature rule on larger checks. Exactly who receives statements first, and how many signatures your checks require, is set by your own bylaws or board policy, not by a universal rule. Check your governing documents.
What should stop you mid-review
Certain patterns are worth pausing on rather than waving through as clerical noise. An HOA attorney's checklist of embezzlement warning signs includes:
"missing bank statements and reconciliations, general ledgers that do not balance, missing and altered documents"
Source: Danger! Warning Signs of Embezzlement, Mulcahy Law Firm, P.C.
The same checklist also flags photocopies where an original document should exist, unexplained cash shortages, unauthorized credits to receivable accounts, duplicate payments to the same vendor, and unexplained overdraft or bank charges. Any one of these showing up during your review is a reason to ask a direct question, not to assume it will sort itself out next month.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your HOA's monthly bank statement arrives. To reduce the chance a dishonest signer intercepts it, who should receive it first?
While reviewing this month's ledger, you notice several vendor payments listed twice for the same invoice number. This pattern is best treated as what?
The board wants its monthly financial review to go beyond simply confirming the checkbook balance. Which pair of tasks matches what a detective-control review should include?
Sources
- Danger! Warning Signs of Embezzlement, Mulcahy Law Firm, P.C.
- Safeguarding HOA Funds: Best Practices to Prevent Fraud and Theft, McKonly & Asbury LLP
- HOA Fraud: A guide to detection and prevention, FirstService Residential
Related elsewhere in the Academy
Banking, Cash & Internal Controls
Next, turn this into a repeatable habit: see how a written bank reconciliation checklist keeps the review consistent every month.
How often a financial review is required, who must receive statements first, and how many signatures a check needs are set by your own bylaws, board policy, or state statute, not by a universal standard.