09/04/2026
When evaluating management companies it is important to make sure you are choosing a company that takes steps to protect your community. At The Dartmouth Group we have a full segregation of duties in our accounting department. What does that mean?
Full segregation of duties in accounting means that no one person has control over an entire financial transaction from start to finish. Instead, key financial responsibilities are divided among different individuals or departments so that errors, fraud, and misappropriation of funds are more likely to be detected and prevented.
For an HOA or condominium association, this is one of the most important internal controls a management company can provide.
What Full Segregation of Duties Looks Like
A properly segregated accounting operation separates these functions:
1. Receiving and Processing Payments
Homeowner assessments are received and deposited.
The person handling deposits should not be able to modify owner account balances.
2. Accounts Payable
Invoices are entered into the system.
The individual entering invoices should not be the same person approving payments.
3. Check and ACH Processing
Payments are prepared by one employee.
Payments are reviewed and released by another employee.
Board approval requirements are followed.
4. Bank Reconciliations
Monthly bank reconciliations are completed by someone who does not issue checks or process deposits.
5. Financial Reporting
Financial statements are prepared by an accountant who is independent from the cash handling process.
6. Oversight and Review
Supervisors review exception reports, reconciliations, and unusual transactions.
Boards receive transparent monthly financial reporting.
Why This Matters for an HOA
HOA boards have a fiduciary duty to protect association funds. If one person can:
Receive money,
Record transactions,
Write checks, and
Reconcile the bank account,
that person could potentially conceal errors or fraud without detection.
When duties are segregated, multiple people are involved in the process, creating checks and balances.
Questions Boards Should Ask a Management Company
When evaluating a management company, consider asking:
Who opens and processes homeowner payments?
Who approves invoices for payment?
Who releases ACH and check payments?
Who performs the bank reconciliations?
Can the property manager move money between accounts without additional authorization?
Does the company have separate accounting personnel from community managers?
Are financial statements reviewed by a supervisor before being sent to the board?
What internal and external audits are performed?
Warning Signs
Be cautious if:
One property manager handles all accounting functions.
Bank reconciliations are not completed monthly.
Reserve transfers occur without documented board authorization.
Vendor payments can be issued without a second review.
The company has no dedicated accounting department.
Why Larger Management Companies Often Have an Advantage
Many larger management firms have dedicated departments for:
Accounts receivable
Accounts payable
Cash management
Bank reconciliations
Financial reporting
Internal audit
This structure allows for true segregation of duties that smaller firms may not be able to provide because of limited staffing.
Board-Level Benefit
From a board's perspective, full segregation of duties helps:
Protect association funds
Reduce fraud risk
Improve financial accuracy
Ensure compliance with governing documents
Satisfy fiduciary responsibilities
Increase confidence among homeowners and auditors
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