Protect Your Cash. More important now than ever.

The financial landscape is constantly evolving, and in these uncertain times, it is crucial for homeowners associations (HOAs) and condominiums to safeguard their funds. One such protective measure is keeping your association's cash in bank accounts that are insured by the Federal Deposit Insurance Corporation (FDIC). The recent insolvency of Silicon Valley Bank underscores the importance of this step. In this blog, we will explore the importance of FDIC-insured accounts and discuss the cautionary tale of Silicon Valley Bank's collapse.

What is FDIC Insurance?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government created to maintain stability and public confidence in the nation's financial system. It does so by insuring deposits in banks and thrift institutions for up to $250,000 per depositor, per insured bank, for each account ownership category. This means that if a bank fails, the FDIC will step in to protect the depositors by either finding another institution to take over the failed bank's insured deposits or reimbursing depositors directly for their insured balances.

Silicon Valley Bank

The recent insolvency of Silicon Valley Bank, a renowned institution with a significant presence in the tech industry, caught many by surprise. The bank's downfall was a result of a combination of factors, including management decisions, economic downturns, and the ripple effects of the tech industry's volatility. The sudden closure of the bank left many depositors scrambling to recover their funds, with some facing substantial losses due to the absence of FDIC insurance.

The Importance of FDIC Insurance for Associations

Associations manage substantial funds to maintain and improve their communities. Ensuring that these funds are kept in FDIC-insured accounts is critical for the following reasons:

1. Protection Against Bank Failures: FDIC insurance safeguards your association's cash in the event of a bank failure, as evidenced by the Silicon Valley Bank insolvency. Without this insurance, your association could lose a significant portion, if not all, of its funds.

2. Maintaining Trust and Confidence: Residents trust their boards to manage their funds responsibly. Keeping the association's cash in FDIC-insured accounts demonstrates a commitment to financial security and stability, fostering trust and confidence among the community members.

3. Compliance with State Regulations: Some states require associations to keep their funds in FDIC-insured accounts. Failing to comply with these regulations could lead to legal issues and potential penalties for the association. (Florida doesn't appear to have this requirement.)

4. Peace of Mind: Knowing that your association's funds are protected by FDIC insurance gives board members and residents alike peace of mind, allowing them to focus on other aspects of community management and improvement.

The insolvency of Silicon Valley Bank serves as a stark reminder of the importance of keeping your homeowners association cash in FDIC-insured bank accounts. By taking this precautionary measure, you can help protect your community's financial assets, maintain the trust of your residents, and ensure compliance with state regulations. Invest in your association's future by prioritizing FDIC-insured accounts for your association's cash management.

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.

Common Bookkeeping Errors

Condominiums and Homeowners associations (HOAs) are responsible for managing the finances of a community, and bookkeeping is a crucial aspect of this task. However, even with the best intentions, bookkeeping errors can occur. In this blog post, we will discuss some common bookkeeping errors that associations may encounter and how to avoid them.

1. Misclassifying expenses: One of the most common bookkeeping errors is misclassifying expenses. This occurs when expenses are recorded in the wrong account, leading to inaccurate financial statements. To avoid this, it is important for the associations to have a clear chart of accounts and for the bookkeeper to understand how to correctly categorize expenses.

2. Failure to reconcile bank statements: Reconciling bank statements is an essential part of bookkeeping, as it ensures that the association's financial records are accurate. Failure to reconcile bank statements can lead to discrepancies between the association's records and the bank's records, and can result in errors in the financial statements. To avoid this, it is important for the bookkeeper to reconcile bank statements on a regular basis.

3. Lack of proper documentation: Another common bookkeeping error is a lack of proper documentation. This occurs when transactions are recorded without proper documentation, such as receipts or invoices. This can lead to difficulties in auditing the association's finances and can result in errors in the financial statements. To avoid this, the association should establish a proper documentation process and ensure that all transactions are properly documented.

4. Forgetting to record transactions: Bookkeepers can sometimes forget to record transactions, which can lead to errors in the financial statements. This is especially true for small transactions that might not seem significant, but can add up over time. To avoid this, it is important for the association to establish a system for recording transactions, and for the bookkeeper to double-check that all transactions are recorded. It is also important to make sure all invoices are recorded immediately upon receipt.

5. Overestimating assets: Inaccurately estimating assets is a common mistake. This can lead to incorrect budgeting, and can result in unexpected shortfalls. To avoid this, the association should regularly review and update their records of assets and to work with realistic estimations. This is typically related to the allowance for doubtful accounts and accounts receivable.

By being aware of these common bookkeeping errors, associations can take steps to prevent them from occurring. Regularly reviewing financial statements, proper training, and hiring a professional bookkeeper or accountant could also be helpful. Additionally, having a financial review or audit by a CPA once a year is also a good practice to ensure that the bookkeeping records are accurate and error-free.

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.

Rising Insurance Premiums and Associations

If you’re living in a Florida homeowners association or condominium association, chances are you have just received the proposed budget for the subsequent fiscal year. If you are losing your mind over the 20-30% increases, you’re not alone. There are many reasons, but the most notable of late are the insurance premiums. With many insurance companies leaving Florida or applying for bankruptcy, premiums have skyrocketed for the remaining insurance companies.

Calls have been coming in asking us how to keep assessments low. There is very little we can do to combat the rise in prices, but there are techniques we recommend in structuring the assessments. Our firm can help you carefully plan assessments to keep your resale values high and homeowner complaints to a minimum.

It is always recommended that you speak with your CPA and attorney when planning assessments. Sometimes there are governing document rules that must be followed.

We have been working with our associations for decades to make the best decisions for your association. Contact us if you have any questions about navigating the rise of assessments and staying ahead of the curve.

Disclaimer time... We do our best to provide the most up-to-date and relevant information with our subject matter. It is our opinion, and we are not a government entity nor an authoritative source for professional research. Always hire a professional when you want the most accurate information as it relates to your company/association specifically.

If you have a topic that you'd like to see addressed, please email us and we will add it to our topic list. Click here for our contact information.