Bank on It! Banking Tips for Board Members

A lot of us feel like everyday life keeps getting more and more complicated, and finances are no exception. In Illinois, there are strict limitations to what boards can do with their association’s funds, but that doesn’t mean there aren’t plenty of options. Both smaller and large associations have their respective obstacles to overcome when it comes to managing money, whether it’s figuring out how to battle outstanding assessments, or knowing how to navigate the payment of a loan. The bottom line is that administrators need to have at least a passing familiarity with their community's banking practices, and know how to keep their operating funds both safe and accessible, while taking care of their reserve and operating funds.

Types of Accounts

As topics of conversation go, the finances of home associations are not very sexy. In fact, the bank statements of a condo or HOA building in Illinois is probably among the most conservative investment plans one can come across. “Most associations have an operating checking account, at least a reserve money market or savings account,” says Steve Silberman, CPA at Frost, Ruttenberg & Rothblatt PC, a certified public accounting firm in Deerfield. Other than a few other options that will be discussed later, that’s about it.

Maybe someone in your building is a master venture capitalist or investment banker, and brags about consistently getting those big returns without much risk. It’s especially enticing because interest rates remain in the basement, and those returns on bank statements will be next to nothing. But, most boards are hopefully well aware that they have very strict limitations on how they can investment collective funds of their associations. “The associations are required to invest any of the funds in low-risk ventures. So they can’t do things much riskier than, say, certificates of deposit, money market accounts. There are some that I’ve seen do a combination through an investment account with, say Charles Schwab, but they’re still in certificates of deposit, because they’re not allowed to risk the money of an association. It’s part of the Illinois Condominium Act,” says Marnie Gucciard, a senior managing consultant with McGovern & Greene LLP, a forensic accounting firm in Chicago.

The tight restrictions on investment opportunities for associations are there for good reason. “If you’re taking risk, and all of the sudden you lose money by putting it into mutual funds, you’re not doing your proper due diligence as a board member, and it’s possible you could get sued,” says Silberman.

The basic operating checking account is essentially what you pay your bills with on a monthly basis. “There are associations that maintain their own checking account for expenses. Others will have the property managers pay the expenses and bills,” says Gucciard. “I have seen where they can use a pay card, or credit card for the association to charge the expenses but I would advise against that. That’s because it compromises the level of control the association has over how their funds are spent. They should always be the signers on the account; not the property manager, in my opinion. I’m also a fraud manager, so I’m probably a little more conservative than other CPAs out there,” she says.

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