Management company's bookkeeping...

I need some advice. When a management company receives assessments from a homeowner, what dictates where they should put that money (i.e. which expense account or reserve account should it go into?).

Do they allocate money to specific expense or reserve accounts based on what the board tells them, what's written in the covenants, or both?

What if the board tells them to do one thing, but the covenants clearly say something else. In that case, must the management company follow the covenants (I would think that would be the case, since that's a legally governing document).

If the management company does NOT follow clear "instructions" in the covenant and instead does what the board tells them, can they be sued for not following the covenants?

Regards, Tom

...And if any of them do this deliberately, there could be real repercussions down the line.

Can you be more specific? Does it involved funds to be placed into Reserve Funds/

Tom,

We only have two accounts, 1 checking and 1 savings. We do have line items for our reserves but don't require that separate physical financial accounts be created.

Our bookkeeper puts everything into the checking account. Our Treasure will move money from checking to savings and vice versa as needed. Our Treasurer identifies how much of the Assessments each year is allocated to reserves based on our reserve study and the boards approval of the budget.

Our bookkeeper informs the Treasurer of each deposit and provides copies of the deposit slips. Our Treasurer creates any financial reports for the board.

Tim

I would say no they should not. However, I suspect that they could borrow from those funds providing it is made known to the membership that this is happening and that there is a specific time period for the amount to be paid back.

Our developer actually separated the townhomes into their own HOA separate from the single family homes. This prevented a lot of issues. You might want to suggest that as a solution.