Condo associations have a responsibility to manage the association funds responsibly and use those funds in the best interest of the property. When facing claims of reserve fund mismanagement, a proactive and comprehensive response is important.
There are several things to consider when your condo association faces accusations of reserve fund mismanagement.
Financial record transparency
The more transparent your association’s financial records, the better. Accurate and well-organized records help to demonstrate the responsible management of reserve funds. Associations should keep copies of supporting documents for every expense and all of the money coming into the account.
Routine account reviews
Schedule routine reserve account reviews from someone other than the typical fund manager. This offers a system of checks and balances that can reveal any discrepancies in the reserve fund’s use and management.
Hiring an external audit firm will help you show the residents that your association takes its responsibility seriously. Annual reports from auditors support your fund management activities in the event of any accusations.
Governing document compliance
Governing documents, including the bylaws and CC&Rs, set the expectations for financial management and procedures. Ensure that every decision, expense and investment adheres to those procedures. Keep records of your approval process as well. For example, require signatures from someone at each level of the governing process for all financial decisions.
Condo associations account for approximately 35% of the community associations throughout the United States. Financial management is an important part of association duties. These tips help you document your decision-making and provide evidence in case of any questions.