NEW REQUIREMENTS FOR HANDLING HOA FINANCES (December 2018)

Pursuant to Senate Bill 2912, which the Governor signed in September, the Davis-Stirling Common Interest Development Act has been amended to add new requirements effective January 1, 2019 for handling association finances.  The new requirements are as follows:

• Unless the governing documents impose more stringent standards, the Board must review, on a monthly basis, (1) a current reconciliation of the operating accounts, (2) a current reconciliation of the reserve accounts, (3) the current year’s actual operating revenues and expenses compared to the current year’s budget, (4) the latest account statements for the operating and reserve accounts, (5) an income and expense statement for the operating and reserve accounts, and (6) the check register, monthly general ledger, and delinquent assessment receivable reports.  This requirement may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member, reviews the documents and statements independent of a Board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.
• Transfers of greater than $10,000 or 5 percent of an association’s total combined reserve and operating account deposits, whichever is lower, cannot be made from the reserve or operating accounts without prior written Board approval.  As written, this requirement seems to apply to “internal” transfers from one of the association’s accounts to another.
• Unless the governing documents require greater coverage amounts, associations must maintain fidelity bond coverage for its directors, officers, employees, and, if applicable, managing agent or management company in an amount that is at least the combined amount of the reserves and total assessments for three months. The fidelity bond must include computer fraud and funds transfer fraud.

Please do not hesitate to contact us if you have any questions about these requirements or how to satisfy them.