Building a Block Association

Handling your Block Association's Money

Each block association handles money differently. Here are some of the options, with pros and cons:

“Lock box” account — Some associations believe that banking fees cut too much into an already small treasury. The Treasurer keeps the funds and pays suppliers with cash or money orders. Receipts, records, and reports are the 3Rs for association Treasurers in all situations, but particularly this one. Tax issues may come into question here, too.

“FBO” bank account — Other associations feel a bank account makes their organization more official. A smaller bank or one where an officer already has an account will probably be more amenable to your association’s needs. Banks will generally want to see minutes of the first meeting listing the officers, plus the bylaws and the names and titles of the people authorized to conduct business for the association. A Treasurer can provide a personal Social Security number to open the account, adding an FBO (For the Benefit Of) the block association. This will add to the individual’s interest income reported to the IRS, but generally the interest is minimal and the reduction in paperwork is worth it. Signature cards must be endorsed by those who will be signing on the account, plus the President or Chairperson.

“EIN” bank account — If your association plans to open an account with proceeds from fundraising, a bank may require an EIN (Employer Identification Number) rather than a personal Social Security number. Download Form SS-4 from the home page of www.irs.gov to apply for your EIN, or try the new online interview app that delivers an EIN immediately. The EIN will allow the bank to report the earnings of the Association’s account to the IRS.

A non-profit organization — A few associations have chosen to become a Not-for-Profit Corporation with an EIN number. One Brooklyn block association incorporated to have more credibility with developers. This is a fairly lengthy and complex process, so your group may want to do your research before proceeding. This may also make your association federally tax exempt, and eliminate banking fees, but you are nevertheless required to file an annual Federal Tax Form 990, known as the e-postcard.

For those who want the benefit of a non-profit without the complications, Brooklyn Community Board 6 has created its own non-profit organization called “Friends of Brooklyn Community Board 6, Inc.” which can act as a fiscal conduit to a block association that is interested in applying for a grant but does not have its own 501-c-3 non-profit status. Anyone interested in taking advantage of this should contact Friends of CB6.