Collecting assessments and protecting financial assets is one of the most important functions of an association’s board of directors. It is crucial your board has the proper structure and protocols in place to collect the funds owed and to secure those funds. Here, our Chicago condo and HOA lawyers highlight some of the most important things associations should know about finances, collections and safeguarding assets.
An Overview of the Board’s Fiduciary Duty
First and foremost, it is important to understand a board of directors owes a fiduciary duty to the individual members that make a condo association or homeowners’ association (HOA). As explained by the Illinois Department of Financial and Professional Regulation (IDFPR), a fiduciary duty can be simply defined as a board’s responsibility to “consider budget matters in a businesslike manner and perform due diligence.” In doing this, it is the responsibility of the board to make good decisions for the community as a collective entity. If financial losses are suffered as a result of a breach of fiduciary duty, there could be legal action against the association.
Important Tips for Collecting and Protecting Association Assets
Collecting assessments and safeguarding assets can be complicated — especially in the modern world where condo boards and HOA boards are increasingly required to manage a wide range of different tasks. Here are five tips for safeguarding the assets of a community association:
- Ensure Written Collection Policies are in Place: A community association must ensure there are written collection procedures and written financial policies in place. These policies form the basis of collections — they should be professionally drafted, clear and effective.
- Do Not Let Past Due Assessment Linger: Small and mid-sized community associations often run into problems when they allow past due assessments to linger. The longer an assessment is unpaid, the more difficult it can be to collect the funds owed in the future.
- If Possible, Do Not Accept Cash: To the extent possible condo/HOA associations should not operate in cash. It is much more difficult to document cash transactions and secure funds when receiving cash.
- Get Monthly and Quarterly Financial Statements: The board of directors should be sure to obtain monthly and quarterly financial statements, which provide comprehensive financial information. This documentation is critically important. It is also recommended bank statements are reconciled at regular intervals throughout the year.
- Conduct Annual Audits or Reviews: Finally, every community association should get an annual audit or review of its finances. It is recommended a qualified, independent accountant reviews financial statements to ensure everything is in order.
Consult with Our Chicago, IL Condo/HOA Lawyers Today
At Keough & Moody, P.C., we are committed to providing comprehensive legal services to condominium associations and homeowners’ associations. If you have questions or concerns about finances and collection, our legal team can help. To schedule a strictly confidential consultation, please contact us today. With offices in Naperville, Chicago, and Tinley Park we serve communities in Cook County, DuPage County, Will County, and throughout Northern Illinois.