Volunteers who serve homeowner and condominium associations are usually challenged to do more with less, even when the economy is good.  Segregation of duties is one of the first areas to suffer when people have to take on more tasks.  Many Boards question the need to segregate duties because “It’s so much more efficient to have one person handle invoices, writing checks and reconciling.”  While this may sound efficient, it leaves your community vulnerable. Segregation of duties is critical to reducing the risk of fraud, theft and other inappropriate actions that can occur in an HOA.

Internal controls should be an intentional part of your overall management plan.  Segregation of duties is having more than one person required to complete a financial transaction. For example, one person initiates a transaction, another approves it, and someone else reconciles the bank statements. This concept not only mitigates the risk of fraud and theft, but it can reduce the opportunity for errors.

When everyone on the Board is stretched to their limit, you have to come up with some creative ways to separate financial duties. Blackburn, Childers and Steagall, PLC (located in Johnson City and Kingsport, TN) point out some good options for using personnel and processes that provide adequate management review in their recent Segregation of Duties blog.

Controls are the responsibility of everyone on the Board (not just your treasurer). Look beyond the obvious to others in the community who may be able to assist in effectively segregating duties. It could be well worth the cost to have CPA or an auditor perform a review and provide recommendations about how to mitigate your risks.

If your Board doesn’t have sufficient resources to segregate financial duties, consider a property management company. Engaging an Accredited Association Management Company (AAMC) that has financial systems and processes in place can protect your assets.  Whether you are a large or small community, financial management by a professional company makes good sense. After all, you’re charged with managing one of owners’ most valuable assets—their home.

Whichever way you decide to go, it’s important to dedicate time upfront to set up the appropriate processes and train everyone involved. Emphasize the importance for everyone to follow the process all the time. When you have good internal controls in place and at least two sets of eyes for every transaction, you’re ahead of the curve in mitigating the risk for your community.


Wise Property Solutions is a property management company serving East Tennessee with offices in Knoxville, TN and the Tri-Cities, TN-VA. Specializing in Condominium Association Management, Home Owners Association Management, HOA Management and Gated Community Association Management.


Tri-Cities, TN-VA: 423-926-7373

Knoxville, TN: 865-643-8989

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