When most HOA boards think about their financial responsibilities, they focus on the basics: reviewing the balance sheet, checking the bank account, and approving invoices. While these are necessary tasks, they are not sufficient for proper treasury oversight.
Many boards unknowingly leave gaps in governance, risk management, and reserve fund strategy. These gaps can lead to audit findings, unexpected assessments, board disputes, and even potential liability.
This guide outlines the critical areas every HOA board should review annually, with practical advice to strengthen your financial oversight, optimize cash management, and ensure policy alignment. It’s designed for volunteer boards, property managers, and HOA leaders seeking to improve transparency, efficiency, and financial security.
1. Cash Concentration Risk: Protecting Your Association
Cash concentration risk arises when an HOA’s funds are held in too few accounts, or in accounts that exceed insured limits. Even financially healthy associations can face risk if they don’t monitor:
- Bank diversification: Are funds split across institutions to minimize risk in case of bank failure?
- Insurance coverage: Are all balances fully covered by FDIC/NCUA insurance limits?
- Segregation of funds: Are operating and reserve funds kept separate to prevent accidental misuse?
Insight: Boards that routinely check these items reduce exposure to both operational and legal risks. This is a cornerstone of good HOA financial governance.
2. Idle Cash & Yield Blind Spots: Maximizing Returns Safely
HOAs often hold large sums of cash in low-yield checking accounts, missing opportunities to generate safe returns. Boards should evaluate:
- Account types: Is there a mix of checking, savings, and short-term investments aligned with policy?
- Liquidity planning: Can the HOA cover near-term obligations without penalty?
- Yield optimization: Are reserve and operating funds earning appropriate returns within acceptable risk levels?
Insight: Even modest improvements in yield without increasing risk can meaningfully improve the association’s financial health over time.
3. Reserve Funds Without Treasury Oversight: More Than Just Numbers
Many boards believe a reserve study automatically solves all long-term funding questions. In reality:
- Reserve studies tell what you might need, but not how to manage the cash today.
- Timing of assessments, capital improvements, and reserve draws matters.
- Policy alignment ensures reserve use follows board-approved standards.
- Documentation of board decisions provides transparency and reduces future disputes.
Insight: A treasury-focused review ensures reserves are properly allocated, accessible when needed, and fully compliant with policy and statutory requirements.
4. Governance & Policy Gaps: Protecting the Board and Community
Even financially strong boards can be exposed if policies and documentation are incomplete:
- Outdated investment policies: Without clear guidance, boards may inadvertently increase risk.
- Missing documentation: Decisions made verbally or informally can be questioned later.
- Overreliance on management companies: Boards are ultimately responsible, even if they delegate.
Insight: Clear, board-approved policies reduce fiduciary risk and provide a roadmap for consistent decision-making.
5. The Cost of Not Reviewing: Real Consequences
Failing to perform a holistic treasury review can lead to:
- Audit findings: Mistakes or oversights may result in flagged audits.
- Unexpected assessments: Insufficient reserves or poor liquidity planning can trigger special assessments.
- Board disputes: Lack of transparency breeds confusion and frustration.
- Potential legal exposure: Boards have fiduciary responsibility for proper financial management.
Insight: Annual reviews are not a “nice to have”; they are an essential part of board responsibility and risk mitigation.
6. What a Comprehensive Treasury Health Review Covers
A proper Treasury Health Review examines:
- Liquidity & cash positions: Ensure the HOA can cover both short- and long-term obligations.
- Risk exposure: Evaluate bank concentration, insurance coverage, and financial controls.
- Yield optimization: Maximize returns on operating and reserve funds without increasing risk.
- Policy & governance alignment: Ensure decisions are documented and follow board-approved policies.
- Reserve fund strategy: Confirm reserves are adequate, accessible, and allocated appropriately.
- Documentation: Board minutes, policies, and reporting standards are in place and consistent.
Insight: Boards that perform comprehensive reviews make confident decisions, reduce disputes, and maintain long-term financial health.
7. Actionable Steps for Boards Today
Even before engaging an advisor, boards can:
- Audit all bank accounts for insurance coverage and proper segregation.
- Review reserve studies against actual cash and expected obligations.
- Document policies and past decisions in a centralized repository.
- Assess risk exposure and identify gaps in cash management.
- Set up a review schedule—annual is the minimum; quarterly is ideal for active boards.
8. Takeaway
A thorough treasury review is not just about compliance or numbers, it’s about confidence, clarity, and control.
Boards that proactively manage cash, reserves, and policies reduce risk, increase transparency, and protect both the association and themselves.
For boards seeking independent, board-focused guidance, a Treasury Health Review provides a clear, actionable assessment of:
- Financial health
- Risk exposure
- Policy alignment
- Reserve strategy
Protect your community, simplify oversight, and gain peace of mind. Schedule a Treasury Health Review today.