Article shows what can happen when the board is asleep at the wheel

This article on the home page of HOA Talk shows in scary detail what can happen when boards leave everything to the management company and don't do their jobs:
http://www.starnewsonline.com/news/20160911/ogden-hoa-left-in-lurch-while-management-company-investigated

The HOA not only hasn't been able to access their funds, they don't even seem to know their bank account numbers. In fact, they seem unsure if the MC even kept their money in HOA owned accounts. It's hard for me to believe that a board (or several, apparently) weren't even periodically looking at their own bank statements.

I hope the associations that used this MC are able to recover at least some of their money, but they could be out everything. I wonder if the MC or the HOAs had any insurance that might help in this situation.

For those who let MCs access their funds, what controls do you use to make sure this kind of thing won't happen?

This is an example of why I always say that Association money needs to stay in Association Accounts with the bank statements being sent to the Treasurer. You don't need to be on the account to make deposits.

However, I also understand that in some Associations it may be advantageous for the MC to keep the operating funds in their accounts.

Regardless of which method an Association uses, it's important for the Board to trust but verify.

Crime insurance may help.
The MCs fidelity bond (if they had one) would help.
Seeking a judgement by the courts and seizing assets of the company or owner (if not incorporated) is a possibility.

MelissaP1,
That's all great as long as you have competent BOD's. I had question a Board member as to why he had signed for a $90,000 transfer from our reserve account. He couldn't answer my question and then tried to excuse himself by explaining he did understand financials. It just goes to show that BOD's tend to rely on the MC way too much.

BOD relegating duties to PM does not remove responsibility of fiduciary duties. Also, ignorance is not a defensible action.

Our PM never made decisions with our money. They did of course write checks for regular bills. However, reimbursements or project receipts went through the board only. They could recommend a vendor if they wanted. Our board had to vote after using the 3 bid system to approve any and all contracts.

My opinion is a PM or MC are not members of the HOA. They are not subject nor do they need to comply to our rules. Unless it is contractually defined and paid for, it is up to the HOA to run its own business.