Existing law requires the board of directors to review the association’s financial statements on, at least, a quarterly basis.  The review shall include the balance sheet, income and expense statement, budget comparison report, bank statements, and a reconciliation of the operating and reserve accounts.  This bill would amend Civil Code Section 5500 to require each member of the board, or a subcommittee of the board including the Treasurer and one other director, to review these reports on a monthly basis, along with the check register, monthly general ledger, and delinquent assessment receivable report.

This bill would add Civil Code Section 5501 to allow an individual member of the board to conduct this review outside of a board meeting, provided the review is ratified at the following board meeting and reflected in the minutes of that meeting.

This bill would also amend Civil Code Section 5380 and add Section 5502 to prohibit electronic transfers of funds greater than $10,000 or 5% of an association’s total combined reserve and operating account deposits, whichever is lower, from the association’s operating or reserve accounts without prior board approval.

Finally, this bill would add Civil Code Section 5806 to require the association to maintain fidelity bond coverage in an amount that is equal to or greater than the combined amount of three months of assessments plus reserves.  Coverage shall include dishonest acts by the managing agent and for computer fraud and funds transfer fraud.