As a member of a homeowners association (HOA) Board of Directors, one of the most important issues you have to manage is the community’s finances. It can be a time consuming task, but one that is essential for running a good HOA and for avoiding any potential lawsuits. The good news is that there are plenty of things that an HOA board can do in order to protect their finances.

Here are eight things that you, as a board member, can do to protect your community’s finances:

1. Pay for an audit: Having a periodic audit done is an important move in keeping everything legitimate. In some associations, an annual audit is required by the governing documents. This is something your management company should be aware of, and as their client, you should be informed. In an audit, a third party analyzes everything to ensure all documents and records are satisfactory. An audit can be a major expense, but it is one that is worth taking on.

2. Test the invoices: There have been HOA horror stories concerning vendors being paid more than they were budgeted for. In some of those cases, when the people involved investigated the issue and examined their records, they found that the company hadn’t actually been paid, but had a bogus charge, for which someone wrote a check and pocketed funds for work that wasn’t performed. Always scrutinize the invoices for services to the property.

3. Ensure bank account security: It is important to make sure that your HOA bank account is not penetrable by those who should not have access. Make sure your management company is not authorized to approve large purchases without board approval. Also, make sure your association’s finances are in their own bank account, rather than in a master bank account. Most board members never ask about the details of the bank account.

4. Manage the books properly: It’s important that the financial records are accurate. The person in charge of your HOA’s financial records needs to understand them and ensure that everything is in proper order. Your HOA management company should be providing you with a monthly financial packet by the 15th or 20th of each month, including a general ledger of all expenses. If you are not receiving such a packet on a regular basis, then it’s time to find a new management company.

5. Be committed: Protecting the HOA’s finances takes a commitment from both the HOA board as well as the homeowners. Everyone on the board must be committed to the idea of protecting the finances and exercising caution when it comes to spending.

6. Plan for the future: Without a doubt, things will break, wear out, and need to be replaced or repaired. Every HOA needs to set aside funds for the future and for emergency use. A quality reserve study is essential in this regard.

7. Be transparent: One of the most effective ways to help protect the community’s finances is to be transparent. Your HOA management company needs to be providing you with access to all records. Don’t trust just the board’s treasurer to review the records either; you need to have several eyes on the monthly statements. This will ensure that everything is accurate, being handled correctly, and that there aren’t any issues that need to be addressed.

8. Know when to get help.There may come a time when the HOA board needs assistance with the community’s finances. Don’t be afraid to reach out and get help. Even if it’s expensive, it’s going to be necessary in order to protect the funds. A CPA should prepare an annual report or audit for the association. Usually, your community’s governing documents will require some level of annual reporting by an outside expert. Make sure you are asking for this, as some management companies never investigate what’s required and leave you, as a board, exposed.

With HOA finances being one of the most important issues that communities and homeowners will face, it’s important that measures are taken to protect them. The more the HOA board does to protect the HOA’s finances, the better off the community and their service record will be, and the less problems that are likely to arise.