Board of Directors’ Review of Cash Balances

Written by David T. Schwindt, CPA RS PRA Published: 15 August 2013

One of the easiest and most cost-effective safeguards against fraud and embezzlement for homeowner’s associations is Board of Director review of bank reconciliations. Here are some tips to consider in reviewing bank reconciliations:

  1. Each month the Board of the Directors or, at a minimum the treasurer of the Board of Directors, should review the bank reconciliations for all accounts in conjunction with the financial statement review.
  2. Each bank reconciliation should include the following information:
    – The ending balance from the prior month’s bank statement.
    – All transactions that cleared the bank during the month reconciling to the ending balance on the current month’s bank statement.
    – All outstanding items (transactions that have occurred but have not yet cleared the bank) reconciling the ending balance on the bank statement to the ending balance on the financial statements.
    – The bank statement should be attached to the reconciliation.
  3. Verify that all checks are accounted for on the reconciliation (no check numbers missing) including voided checks. List should include the date, check number, payee, and amount of the check. This list should be reviewed for reasonableness and examined for duplicate payments.
  4. Verify that all deposits are included on the reconciliation. Examine the outstanding items for old outstanding deposits.
  5. Make sure that all transfers between accounts are reflected on both account reconciliations in the same period. All transfers listed should indicate which account received the transfer.
  6. Ask for more information if any item comes to your attention that seems to be out of the ordinary.
  7. Review and approval of the bank reconciliations should be documented in the meeting minutes.