Limiting Access to Bank Accounts

Our association is in AZ, about 80 units. There is an "Authorized Persons and Enabling Resolutions for Corporations" form board members have to sign in order to move money into and out of the account and to invest it. This form gives a great deal of power to individual authorized persons. I asked other banks and they all seem to have a similar form. But I have read that HOAs generally require 2 or more signatures to access funds. How do we legally set that up? Does it have to be an HOA rule or is there some financial form or something?

Some banks won't take responsibility for processing a two-signature check that only has one signature on it. Controls must be on your end.

The way we handle it is:
No electronic approval of transfers. Everything must be done by check. A non-signer holds the physical checks. An authorized signer must go to that non-signer before checks can be written. A bit severe, but we don't write that many checks.

From what I've seen locally, most banks (maybe even all) no longer support requiring two signatures on a check.

We're similar to John, reserves (most of our money) are kept in a different bank than our operating checking account. The treasurer (me), has access to that account, but not to the reserves. The president and vice president are authorized on the reserve accounts, but I get the statements and check them every month, so any withdrawal would be found out quickly.

A couple of months ago I noticed that our reserves were listed in 3 separate bank accounts but there were bank statements for only 2 of the 3. I asked about the missing statement and apparently the bank only generates a monthly statement when there is some activity on the account and there was none for that month. We had to set up online access to the accounts for our bookkeeper to prepare the monthly financial reports. Another director said there was such a thing as "read only online access" that permits viewing of balances and transaction history without the ability to do anything else. I've never heard of such a thing but my experience with online banking software is limited.

Since the OP has not commented since the initial post, some questions remain a mystery.

Is the form a bank form or HOA form. Is it for operating, reserves or both.

Removal of funds from the reserve account SHOULD ALWAYS require the signature of two Board members, no ifs, ands or buts! Having two signatures on every check from an operating is dumb. Banks don't observe that any longer.

Make sure the association has checks and balances for payments made and that they are continuously observed and followed.

Many associations, especially in CA, have provisions written into their Bylaws, requiring two signatures.

Sylvia

I will only respond to my part.

I don't believe you will find banks enforcing a two signature account, that will be for the Board to do on its own.

As an owner of a management company, I can do an internal transfer of funds, the operating and reserves being with the same bank, as long as they have written and signed authorization from two Board members. They also must be on the signature card on file with the bank.

Thanks for your answer Richard. We will set something similar up with our management, but my concern is not really with the management who are professionals in business for multiple years, but with volunteer board members who only serve a year or so and are untrained.

GenoS, Thanks for your answer too. You may be grandfathered in to 2 signatures, (or your officers may think that's how it is) but it seems like banks don't enforce it anymore. There was a suggestion that I think will cover the checks, but the official form of the bank also allows oral communication which is a worry. This seems to be a standard legal form because other banks I talked to had a similar form allowing oral communication.

I'm also Secretary but trying to set up so we can actually invest funds. I don't think our board will pass anything that allows one person to withdraw funds on an oral instruction - it is a bit scary! We don't have to show up but we do have to sign a whole lot of legal language that says the Resolutions were presented to the members of the Corporation (the homeowners) at a board meeting. And the Secretary has to verify signatures and true representation on the form.

Your topic of FDIC insured accounts probably deserves it's own thread since it is a different topic, but that's why I'm trying to get access to the account, so we can split it because it's over the FDIC limit. Our solution is going to be to have two accounts that are both under the FDIC limit. There is a sweep investment method. It puts your money into something called ICS = insured cash sweep. It shares the money between multiple banks and is insured up to $2 million. Problem is the interest rate is really low. Another option is CDRS it's a CD split between banks and insured up to $50 million. Same problem - low interest rates. So that's why we are trying to go with two accounts, both < $150,000.

Our accounts are with two nationwide mega banks, maybe smaller local banks still do double signatures, but neither of ours does.

We did the same thing Tim. There are specialized checkbook/ledger used for this process. It is kind of expensive I will say. It's not like buying duplicate checks. However, it allowed us to show no check was cashed without the approved signatures. That way if someone wanted to go "witch hunting" they could see if each check was properly signed and accounted for. We also had to go to the bank and remove/add people to the "signature card" at the bank each election. We only allowed Board Officers to be on the account. Which was President, Vice-President, Secretary, and Treasurer. However, it was preferred the President ALWAYS be the signatory. The treasurer was the one who wrote the checks.

Our Ex-president was quite crooked. I had to watch when he was Vice-President that first year I was in office. The Treasurer would sometimes still give him checks which he could sign and by-pass mine. Especially since he would still do contract repair work with the HOA. Luckily, the Secretary moved. This then restricted his by-pass ability. So there are ways to get around this 2 signature system. However, making a rule President/Treasurer ALWAYS sign off helps protect if you have questionable officers...

I agree Larry, it's not good financial control.

However, it is simply some level of control.

Using bill pay over checks is another level of control.

Utilizing two signatures on every check is another level of control.

Having one individual make the deposits, a different individual issue payments and a third individual reconcile the bank statement is another level of control.

Providing Bank Statements and reconciliation statements with the monthly financials is another level of control (well review).

Depending on the size of the Association, the number of volunteers available, the number of contractors/employees the Association can afford to hire, the technical ability of said volunteers and the financial knowledge of those same volunteers, each Association must make their own decision on how strong of a control they are willing to put on Association finances and still be able to attract volunteers to serve and keep assessments to a reasonable level.