For many associations, repair costs are often in excess of $1 million. Therefore, extra care needs to be taken in handling the accounting of these funds. An Association should not assume that the money is safe because it is in a “trust account.” The safety of the money is largely dependent on the withdrawal procedures that are set up. The following tips may be helpful:
- The funds should be held in a separate account and not combined in an account with other association funds.
- Two board members should be required to sign every check.
- Guidelines for signing the checks should be established by the board. For example, there should be documentation such as invoices approved by the construction manager, which are then forwarded for payment. The two board members should then review the invoice before signing the check.
- The funds should be kept in an account at a major financial institution.
- It is wise to maximize interest earned from the funds, but the interest-bearing vehicle should be low risk. Large financial institutions have commercial account, and in some instances association account advisors who can assist in placing the funds where they are safe, accessible when required and interest is optimal for a low level of risk.
- The funds should be audited annually, and a final audit performed at the end of the major repair. It is important to be able to precisely account for all the funds and provide a report to the association.