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Accounting Practices

At Southern Community Services (SCS), we take the matter of financial security very seriously and we feel that you should be aware of the measures that SCS employs to ensure the protection and safety of client associations’ funds.

We have strict accounting protocols in place at SCS, with separation of duties and redundancy that provide a very high level of security to safeguard your association funds.

View our protocol below so you may better understand how we protect your funds

Invoice Review/Approval

4 or more individuals are involved in the electronic review/approval for every invoice:

  • Association Manager
  • AP Administrator
1 or More Board Members
  • Controller from SCS
  • Senior Executive from SCS

Each views an electronic image of the invoice and pertinent notes related to this transaction:

  • Is this a budgeted/planned transaction?
  • If not, who approved the work to be performed?
  • Did you follow the CC&R’s and contract limitations when approving the invoice?

Separation of duties/Internal Control for all accounting/financial functions

  • Accounts Payable staff member reviews invoices; additional review by manager/others, per above
  • Separate staff member cuts check
  • Third staff member signs check
  • Fourth staff member reconciles bank statement

Financial Statement Review - 3 Step Process:

Accountant #1 – SCS – Prior to month end, financials are reviewed for the following

  • Balance Sheet Accounts reconcile to ancillary reports
  • Majority of operating cash is in Interest bearing account
  • Income/Expense Variances–Actual vs.Budget are reviewed with the manager

Accountant #2 – SCS – Between the 10th and the 15th of the month

  • Comprehensive Review
  • Financial Management Report is produced for the client that shows
    • All financial activity, payments, checks, payables, bank reconciliations, bank statements, construction deposits, reserve activity
    • Balance Sheet and Backup Reports
    • Comparison of History to Current Balances
      • Track trends of AR, Reserve Balances
      • Produce a comparative Balance Sheet, i.e., last year to this year
    • Bank Reconciliations include the following
      • Compare Bank Balance to General Ledger Balance
      • Copy of the Bank Statement
      • Outstanding Check List
      • Outstanding Deposit List

Manager #3 – Manager reviews above reports and comments, and adds specific information that he is knowledgeable about for the board’s benefit.

Billing Owner Assessments

  • 3 or more separate individuals are involved in the billing/collections process
    • OperationsManager
      • Charges
      • Produces Sample Invoice
    • Association Manager
      • Reviews & approves amounts, plus totals and compares to budget
    • 1 or More Board Members
      • Reviews & approves “Proof” that shows all details regarding the invoice
    • Deposit Personnel
      • This person applies payments to the owner account
    • Collections Manager
      • Verifies AR balances, sends out late notices
  • Board sees detailed owner balance information clearly separating Charge Types
  • Electronic/Lockbox Payment options available – Eliminates manual entry of payments
  • Board can receive either a transaction history report, or, can access to this information electronically

Independent CPA - Audit/Review

  • This should be done on frequency determined by the board of independent CPA
  • If not an annual full audit, opt for a Review, or Compilation by a CPA, selected by the board, not the management company

Cash/Accrual/Hybrid Financial Statements

  • ​Board receives an income statement that ties to the Balance Sheet

SCS Insurance Coverage Limits

You shouldn’t have to worry about your HOA money being safeguarded. In addition to the strict protocols above, SCS has ample insurance coverage in place to protect associations from any possible harm.

  • Employee Dishonesty/Fidelity Bond
    • $500,000 Employee Dishonesty Policy with Hartford A+ rating
    • $1,000,000 Fidelity Bond with Hiscox, which includes $100,000 aggregate sublimit to extend the computer fraud and funds transfer coverage to include client funds
  • Cyber Crime Insurance Coverage
    • $100,000 sublimit on SCS policy to cover clients, though each association should carry its own Crime/Fidelity policy to cover association funds
  • General Liability
    • $1,000,000/occurrence ,$2,000,000 aggregate
    • Umbrella of $150,000,000 per occurrence
  • Professional Liability/E&O
    • $1,000,000 each claim, $1,000,000 aggregate

Should you have any further questions about HOA Community Management terminology, please give us a call at SCS and we’ll be happy to help you: (803) 865-5470