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On solid financial ground

The work of IREM’s Audit and Investments Committee

By Renee M. Savage, CPM, CCIM
Businessman Looking Graph And Summary Report On Digital Tablet Screen With Analysis Data Result.

As property managers, we know what it means to be good stewards of other people’s money. We’re entrusted with funds flowing in and out of our properties. We must make sure every cent is accounted for, delivered in a timely manner, and put to its best use in pursuit of the owner’s goals for the asset.

The Audit and Investments Committee’s work serves a similar purpose for your association. The main objective of the committee is to oversee IREM’s internal accounting controls, managed investments, annual external audit, and tax filings.

Committee members

The composition of the committee is specified in the Institute’s Statement of Policies. Generally, committee members must have broad business and financial experience and knowledge of the Institute’s operations.

The committee comprises:

  1. The IREM secretary/treasurer as chair
  2. A representative from the IREM Foundation
  3. A past IREM national president
  4. The incoming IREM secretary/treasurer
  5. A member with a strong financial background who is employed by a large real estate management firm
  6. Up to two additional members, neither of whom is on the Executive Committee

As 2021 secretary/treasurer, I serve as this year’s chair of the Audit and Investments Committee, continuing the important work of my predecessors in keeping IREM safe, strong, and solvent for the long haul.

Other committee members include:

  • John Koss, CPM, vice chair
  • Mark Boehnlein, CPM
  • Libby Ekre, CPM
  • John Gallagher, CPM
  • Dee Headley, CPM, IREM Foundation representative
  • Cher Zucker-Maltese, CPM

Staff liaisons include:

  • Christopher Migala, CPA, IREM CFO
  • Donald Ross, CPA, IREM Comptroller

Along with our HQ partners, my fellow committee members and I are dedicated to maintaining IREM’s position as a solid and trusted partner in an ever-shifting business landscape. Foundational to this effort is the committee’s oversight of the Institute’s financial position and policies.

Investment funds

IREM maintains three separate investment funds, defined by the Institute’s investment policies. Two of these funds are defined as IREM’s Reserve Fund. The Audit and Investments Committee is responsible for the investment funds’ safekeeping and general administration. Let’s take a look at each of these funds.

Short-Term Operating Fund

The Short-Term Operating account’s purpose is to adequately fund IREM’s annual operating needs. Therefore, the investment strategy of this account is to emphasize preservation. The duration of the account is considered less than one year.

Intermediate Investment Fund

The Intermediate Investment account’s purpose is to adequately fund the upcoming capital needs of IREM. The investment strategy of the Intermediate Investment account is to emphasize total return, or the aggregate return from both capital appreciation and dividend and interest income.

The duration of the account may vary since unforeseen events sometimes require usage of the funds. However, the duration is typically considered as intermediate, or between five and seven years.

Special Reserve Fund

The Special Reserve account’s purpose is strictly limited to periods of substantial income decline or unfavorable economic conditions. In such conditions, this account allows IREM to maintain near-normal business operations for a limited period of time.

Executive Committee approval and Governing Council notification are required to use the account, along with a five-year plan for rebuilding the account’s asset base. Investments are considered long-term.

Reserve Fund

The 2020 Audit and Investments Committee passed a motion, subsequently passed by the Executive Committee and Governing Council, to change the Statement of Policies to better define the Intermediate Investment Fund and Special Reserve Fund as IREM’s Reserve Fund.

The committee felt it was important to continue with the two separate funds (Intermediate Investment Fund and Special Reserve Fund) rather than consolidate them because each fund has a different investment horizon, which can be beneficial in preserving the Reserve Fund’s balance.

Oversight of investments

In its stewardship of these investment funds, the Audit and Investments Committee gets regular updates from IREM’s investment advisor on the valuation of funds.

Regular consultation with the investment advisor allows us to make informed decisions on the portfolio and its composition.

The committee periodically reviews IREM’s investment policies so that those policies reflect current best practices for associations. Sometimes these reviews result in policy revisions, like the review in 2020 that led to a better definition of IREM’s Reserve Fund. To conduct these reviews, committee members and our staff partners review leading best practices in investment policies for associations from organizations such as the American Institute of Certified Public Accountants (AICPA).

The IREM headquarters finance team also submits for committee review recommendations to move funds between accounts. This oversight is a financial control that maintains accountability, confirms decision-making, and ensures compliance with the Institute’s investment policies.

Annual audit

Another committee purpose is to oversee IREM’s annual external audit. The annual audit evaluates IREM’s operating and investment accounts as well as financial controls. The committee reviews and operationalizes findings and recommendations from the auditing firm.

The committee also participates in selection of the auditing firm. A key goal here is to maintain efficiency while following leading best practices on auditor rotation. Periodic change in the auditor introduces a fresh perspective and guards against complacency. Either the firm management team assigned to IREM’s audit or the firm itself changes periodically, and the Audit and Investments Committee guides that decision-making and firm selection process.

Annual tax filings

IREM is a 501 (c)(6), a type of nonprofit organization as defined by the IRS. The Institute files an annual Form 990, Return of Organization Exempt from Income Tax. On a schedule dictated by the annual U.S. tax filing deadline, the Audit and Investments Committee reviews and approves IREM’s Form 990 as prepared and presented by the association’s tax accounting firm. Once the form is accurate, finalized, and approved by the committee, it is filed with the IRS, and the Executive Committee and Governing Council are notified.

The Audit and Investments Committee plays an important part in IREM governance. Accountability to the Executive Committee and Governing Council are key to this role. Committee members take seriously our responsibility to ensure the Institute’s ongoing stability, success, and long-term viability.

IREM members expect nothing less. Our association must remain financially positioned to produce the education, advocacy, and resources we turn to in managing our properties. A firm, consistent eye on the Institute’s investments, financial controls, and tax filings makes that possible.

Journal of Property Management

Renee M. Savage, CPM, CCIM, is the secretary/treasurer for IREM and president of CFI-Capital Growth, Inc., AMO, in San Diego, which is a boutique multifamily company. Renee also serves as an asset manager in an affiliate, CFI, a commercial management company.

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