Partnering with the Right Bank Can Make All the Difference

By Teresa Powell

If you want your HOA to make a positive impact on the community it serves, the first order of business for you or your management company should be finding an HOA-friendly banking partner.

Unique and nuanced, HOA banking requires a very specific focus and skillset. The right banking partner, combined with the latest in technology and best practices, will help keep your funds safe and secure while also streamlining your processes.

Look for a bank with a dedicated department of HOA banking specialists that offers a comprehensive program including collections and payables, investments and loans while also providing the tools that allow you to manage appropriate oversight, control, and triggers.

When it comes to specialty deposit accounts, your bank should be focused on achieving good yields, with low or no bank fees and a strong treasury management offering that includes ACH, online banking, and lockbox services.

One of the most important things to remember: keep signature cards current. Since the board of directors and/or authorized signers may change each year, up-to-date signature cards allow a smooth and streamlined way to handle execution and avoid delayed access to funds. Without current signatures, certificates of deposit may renew and special requests such as cashiers’ checks and fund transfers may not be completed.

To streamline the check writing process, be sure that the latest signatures are scanned into the payables system and the system is set up to circulate invoices appropriately so that the board knows exactly what is being paid.

An HOA-friendly bank will have a multitude of ways to collect homeowner assessments including eCheck, checks mailed to a lockbox, credit card, debit card, bill pay through online banking, and ACH.

ACH or electronic transactions can now be originated easily through online banking systems and accounting systems to streamline payment and collection activities. A best practice is to utilize dual control by ensuring that two different people process the ACH/electronic transactions. Most accounting systems have the ability to originate ACH transactions — make sure it allows for dual control. Leverage technology like Positive Pay and ACH Blocking where you can for account and transaction oversight.

The right HOA banking partner will offer easy management of funds between operating and reserves i.e., automatic reserve transfers and investing excess reserves.

To keep your funds safe, FDIC Insurance covers up to $250,000 per corporate Tax ID number at any one bank. SIPC covers $500,000, and up to $250,000 of that can be cash. Private coverage may be offered by some banks, and it is important to clearly understand the limits, underwriting, and which accounts are covered.

For full FDIC coverage, look for a bank that offers placement services using either automatic sweep or certificates of deposit. Use one program to ensure all your investments are covered, where only one signature card is required, and the investment process is streamlined with one monthly statement and one 1099 at year-end.

You may find a time when your association needs to get a repair completed, but the funds just aren’t available. Perhaps there is more hidden damage than anticipated, something unexpected occurred, or there was just poor planning on the part of prior board members.

A loan from a bank with HOA expertise can be the answer. The collateral for an HOA loan can possibly be the assessment stream. The bank will need to know there are enough funds coming in to cover the association’s expenses, continue to fund the reserves, and make the loan payment. If a special assessment is needed, the bank loan will allow those owners who cannot make an upfront payment to pay the association over time, while the project proceeds as planned.

Keep your association on solid ground and partner with a team of experienced HOA banking specialists who will help lower costs and improve efficiencies and cash flow, all while providing effective management control to keep your funds safe and secure.

Teresa Powell is the Executive Vice President and Director of HOA & Deposit Services for the Heritage Bank of Commerce.

If a check is stolen (for example from the mailbox of a board member or vendor), the account should be closed. Fraud on the old account could occur months after the theft.

Over 45-60 days, place a stop payment and contact the payee to determine if the check was lost or stolen.

Never include full account numbers and Tax IDs in email exchanges. Emails are not secure, and once a fraudster has access to this information, they can use it for fraud. Be wary of clicking on links or opening attachments in an email. These can be utilized to deliver a virus to your computer and then be used to compromise much of the information or activity on your computer.

The payee and possibly the amount on a legitimate check are altered. Accounts should be monitored frequently to ensure the correct amounts have cleared. Positive Pay can assist with this process as it will flag checks with an incorrect amount and possibly, an incorrect payee.

It is important to periodically monitor accounts to ensure the amount matches your ledger, especially if the accounts are not reconciled monthly. Positive Pay can assist with this process as it will flag checks with an incorrect amount and possibly, an incorrect payee.

Confirm who is authorized to transfer funds between accounts and determine if two approvals are required.

If possible, have dual controls/separation of duties within the association or management company to avoid fraud or errors committed by company employees.

If the accounting system allows, use blank check stock so there are no pre-printed checks to be stolen. Pre-printed checks should be stored in a locked cabinet.