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 New England, 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 homeowner associations are not very sexy. In fact, the bank statements of a condo or HOA building in New England is probably among the most conservative investment plans one can come across. Associations often have quite a bit of money to invest, but the limits with what they can do it means that there aren't a whole lot in the financial industry made especially for the industry. “Based on my experience,” says Kokalari, a senior financial advisor for Merrill Lynch, “commercial banks typically have account representatives who service operating accounts for managing agents and who are familiar with the day-to-day transactional banking needs related to managing co-ops and condos.” However, he says, “As far as managing reserve investment accounts are concerned, to my knowledge, there’s not a wide field of people or institutions who are set up to specifically service these types of accounts.”

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 invest the collective funds of their associations. “These days, it's pretty much cash money market accounts, and the most aggressive thing I see on a regular basis is a [certificates of deposit] account,” says Chad Clark, CPA at Roselli, Clark & Associates in Woburn, Massachusetts. “I do have a couple out there that are still in investments, but a lot of them took some hits, and even lost some principal, which as a fiduciary board member, is not a great idea to have that work out,” he says.

But that's not to say that having financially astute members in your association is not a boon. “Because boards are so much more sophisticated than they were ten years ago, the people that are now buying the units—living in the associations and on the board—they get it. The condominium, which used to be affordable, now it's more living style that's the drawing card, and you've got very astute people with good finance acumen,” says Mark Love, CPA at Love, Jarominsky, & Raymond LLC, based in Worcester, Massachusetts.

Still, the most important responsibility of a board member is not to lose any of the association's money, no matter how talented a stock market trader. While there are no strict, legal restrictions on how boards can invest their association's money, they will always be accountable to the responsibilities of a fiduciary. If a board members do lose principal in an investment, there's definitely grounds for a lawsuit


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