Banking, Cash & Internal Controls

Four layers of rules, not one

Your CC&Rs, bylaws, and any board-adopted financial policy set the baseline: how many signers, what dollar threshold requires a second signature, whether a written investment policy exists at all. State law can sit on top of that baseline, sometimes narrowly and sometimes as a flat rule.

Florida, for example, makes it a crime for an association or its officers to use a debit card for anything that is not a lawful association expense, and California requires prior written board approval before funds move out of reserve or operating accounts above a set threshold. Neither rule generalizes to every state; check your own state's statute and your own governing documents.

If your association's units carry mortgages meant for sale to Fannie Mae, a third layer applies: its Selling Guide requires fidelity/crime insurance covering anyone who handles or is responsible for association funds, paid or not, and the minimum coverage amount depends on whether internal controls like the ones in this course are actually in place. Finally, federal deposit insurance sets a hard ceiling that no bylaw, statute, or board resolution can raise.

"The standard maximum deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category."

Source: Your Insured Deposits, FDIC

Trust is not a control

The single most common mistake this course corrects is treating a trusted volunteer as a substitute for structure. Segregation of duties means no one person controls authorization, custody, recordkeeping, and reconciliation for the same transaction. A treasurer who writes checks, holds the checkbook, and reconciles the bank statement alone has none of that, no matter how long the board has known them. The control removes opportunity; it says nothing about anyone's character.

"Segregation of Duties is a system designed to prevent theft and fraud."

Source: Segregation of Duties, Personal MBA

Occupational fraud investigators report that tips, not audits, catch most fraud, and more than half of those tips come from employees. That argues for a clear, low-friction way for a resident, vendor, or board member to raise a concern, not just an annual audit. Training helps too: organizations that trained both staff and management reported meaningfully lower fraud losses than organizations that trained neither.

Where reserve money should sit

Boards regularly confuse two products that share a name. A bank's money market deposit account is FDIC-insured like a savings account. A money market fund is different.

"Money market funds are a type of mutual fund that invest in liquid, short-term debt securities, cash and cash equivalents."

Source: Money Market Fund, U.S. Securities and Exchange Commission

That makes it a security, not a bank deposit, and it carries no FDIC insurance. Ask which one you are actually being offered before assuming coverage applies. For reserve balances above the $250,000 insurance ceiling, boards have two accepted paths: a deposit-placement service that spreads the balance across a network of banks while the association keeps one banking relationship, or Treasury bills, which are backed by the federal government rather than deposit insurance and carry no ceiling at all. A widely used framework for a written investment policy ranks the objectives in order: safety first, then liquidity, then yield.