November 2023

TIGHTENING Financial Controls in the Post-Pandemic World By Ed Kwiatkowski, CPA, Ed Kwiatkowski, CPA, LLC

T he COVID-19 pandemic shook up many industries’ practices and procedures; some of these changes were for the better and will remain in place, while others only existed for the duration of the pandemic. Common interest community associations (CICs) were no different. Sure, there was still an annual budget, landscaping, snow removal, a management company, and an annual audit, among other things. However, were accounting policies changed to better suit the pandemic world? Did your association allow manag ers to sign checks? Did it fast-track specific invoice approval procedures as vendors were requesting expedited payments to pay their employees? Usually, the end of each year is an excellent time to review all policies and procedures for efficiency and to ensure strong controls. As we approach the end of the pandemic and transition into a more “normal” world, we should also look to strengthen any controls that were relaxed during the pandemic and begin to tighten financial controls back to pre-pandemic standards or to even improve them over what they were before. Below are several procedures that should be reviewed for stricter financial controls: 1) Documentation: All financial requests should be supported with proper documentation. Deposits (other than maintenance assessment

checks) should have proper backup kept on file. This includes the municipal services reimbursement check, which generally lags a year behind to ensure each year is received. But most important are the expenses from the association checkbooks. Vendors should submit invoices on company letterhead and address these directly to the association (not the management company) with a specific location of work performed in the community. Check requests for miscellaneous expenses and reimbursements should be accompanied by receipts, e-mails, account histories, etc. 2) Approval: Every financial request should be approved by a member or members of the board. With many electric systems in place now, the property managers usually have first approval of an invoice or check request so that they can review and code it appropriately according to the annual budget. However, payment should not be processed until a board member has ultimately reviewed and approved that invoice or check pay ment request. With a proper paper trail that contains support ing documentation, you will be prepared for a potential audit or should you need to review a discrepancy. 3) Dual signatures on checks: Check signatures are an example of a financial control that has become highly lax over the course of the pandemic. CONTINUES ON PAGE 28

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NOVEMBER 2023