Thanks to Jeanne for making this available for me to share!
Jeanne N. Ketley, Ph.D.
President, Maryland Homeowners’ Association, Inc.
Every month you pay a fee to your association. Your association uses this money to maintain common property, pay condo or HOA insurance and management fees among many other things. Some associations are self-managed and the treasurer collects assessments and pays bills. More often associations use a professional management company to collect assessments and pay bills. The amount of knowledge needed to manage what is, in essence, a corporation is vast and that is why most associations use a management company. To strengthen good governance in your community, MHA recommends that your Board put in place a number of best practices designed to provide greater administrative transparency and accountability over daily operations. When such services are contracted via a management company, the Board remains the corporate entity that is ultimately held responsible for fraud associated with fiscal mismanagement, accounting lapses and/or poor bookkeeping. Board members should be diligent about:
• Requiring dual signatures for any expenditure of condominium funds, presumably the signatures of a manager and a board member. No one person should have sole control of association funds. If co-signing checks is inconvenient, one or more board members should have electronic read-only access to all association accounts. Since accounts now have images of the actual checks written, a board member should view these checks electronically and compare them against the figures in the board’s monthly reports.
• Requiring the bank to send a duplicate monthly statement directly from the bank to the board treasurer so the treasurer can compare the bank’s figures against those in the monthly report from the management company.
• Requiring a board member to periodically compare invoices against checks paid.
• Using an independent Certified Public Accountant (CPA) to conduct a yearly audit. The association board should select the CPA rather than have the management company do the selection. The CPA should send this report directly to the Board.
It’s hard to believe that a neighbor or professional manager could mismanage association funds but it does happen. Installing safeguards can add to the financial stability of your community.
For more protections, see the article by acclaimed real estate attorney Benny Kass in the November 16, 2012 Real Estate section of the Washington Post. E-mail MHA if you need the actual link to this very comprehensive article.
If you’d like to access the Maryland Condominium Act to see the laws affecting your home, you can access it by going to http://mlis.state.md.us/#stat, selecting “Maryland Code Online”, agree to the terms presented, then select “Real Property” and then click on “Title 11-Maryland Condominium Act.”
If you have questions or want to suggest topics for Condo Corner, send them to email@example.com
(The information contained herein is for the general information of the reader and should not be construed as legal advice. Readers should seek competent legal counsel regarding any legal issue.)