Questions directors should ask every month

Start with the reconciliation, not the balance

A treasurer saying "the bank balance looks right" is not the same as a bank reconciliation. A reconciliation compares what the association's own books say against what the bank statement says, and shows exactly where the two differ, if at all.

"A necessary control to safeguard cash against fraud and losses, and to ensure the accuracy of accounting records."

Source: BARS GAAP Manual, Bank Reconciliations, Washington State Office of the State Auditor

Ask to see the actual reconciliation document, with the bank statement attached, not a verbal summary. If it is not in the board packet, ask why.

Compare actual spending to budget, line by line

A one-line "we're on budget" is not enough. Ask for the variance report: budgeted amount, actual amount, and the dollar or percentage difference for every category, not just the total.

A large variance is not automatically a problem, a burst pipe or a rate increase can explain it. The question is whether someone can explain it, and whether it will keep happening for the rest of the year. Read more in Understanding variance reports.

Ask who owes money, and for how long

Unpaid owner assessments are an accounts receivable, an amount owed to the association, not yet in the bank. A healthy income statement can hide a growing pile of receivables that may never be collected.

Ask for an aging report: how much is 30 days late, 60 days late, 90 days or more. A rising 90-plus-day balance, month after month, is worth a direct question about what collection steps are underway.

Ask what documentation backs every unusual payment

Look at the check register or general ledger for anything without a clear paper trail behind it. Every legitimate vendor payment should have an invoice, contract, or work order attached to it, so a missing one is worth flagging.

"A red flag is not a finding. But unexplained financial activity should be tested, documented, and understood."

Source: 10 Warning Signs of HOA Fraud and Embezzlement, Blake Files Forensic Solutions

One state, California, actually writes a monthly review list into statute: reconciliations of operating and reserve accounts, budget-versus-actual figures, bank statements, income and expense statements, and the check register, general ledger, and delinquency reports. Whether your state requires a monthly review at all, and what it must cover, is a question for your own state's statute and your governing documents; treat California's list as a useful model, not a nationwide rule.