Respond to Red Flags

Good financial oversight includes knowing what deserves a closer look and what to do when information is missing, inconsistent, unusual, or unexplained.

What May Be a Red Flag

Financial Activity

Bank balances that don't match reports
Unexplained transfers or withdrawals
Large or unusual payments
Unexpected reserve activity

Records and Procedures

Missing or delayed financial records
Unfamiliar vendors or payees
Transactions without required approvals
Repeatedly incomplete financial reports

A Red Flag Example

The board notices a large payment to an unfamiliar vendor.

The board asks what the payment was for, requests the invoice or contract, and confirms that the payment was properly approved.

If questions remain unanswered, the board documents the concern, assigns follow-up, and continues seeking an explanation.

A red flag does not automatically mean something is wrong. It means the board needs more information and should follow up until the concern is addressed.

Questions to Ask

What happened, and what information is missing?
What independent records can confirm what happened?
Was the activity properly authorized and documented?
Is this an isolated concern or part of a recurring pattern?
Who will follow up, and when is an answer expected?

How the Board Should Respond

Document the concern

Record what appears unusual or unexplained.
Request information

Obtain relevant records and a clear explanation.
Verify important details

Use independent sources when appropriate.
Assign responsibility

Identify who will follow up and set a reasonable deadline.
Resolve or escalate

Document the outcome and seek additional help if significant concerns remain.

When Outside Help May Be Appropriate

The board may need professional assistance when significant amounts are involved, records are missing or withheld, explanations remain inconsistent, or unauthorized activity is suspected.

Depending on the concern, assistance may come from the association's CPA, auditor, attorney, insurance professional, or forensic accountant.

Document Questions and Follow-Up

Use the free Monthly Financial Review Checklist to record concerns, request supporting information, and track unresolved questions.

View the Monthly Review Checklist →

Keep Financial Oversight on Your Board's Agenda

Each monthly Board Briefing explores a financial oversight topic in plain language, with practical questions and guidance your board can put to use.

Explore Board Briefings →