Out-of-state checking account

Started by TammyC3 • 19 replies • 608 views

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TammyC3 (New Mexico)
Posts: 102

Posted:

A few of our 7 directors, including myself, are brand spankin' new to this arena. We are open to guidance and correction. Thank you for taking the time.

5 directors are residents and 2 live out of state & purchased their property for retirement and vacation.

Our Association's checking account is held in an out-of-state bank and is managed by our long time treasurer (who lives out of state). There are no branches of the bank in our state (NM). The treasurer is the accounts only? (known) authorized 'signer, although the board is still unclear on this. The treasurer has been unable to visit NM for several years due to health concerns.

Question at our 2018 annual meeting: If the treasurer should become unable or unavailable to sign a check, how would the association maintain/regain control of the funds? The treasurer was unable to answer this question. It was determined that, at the least, it would require a 9 hour round trip to retrieve the checkbook, records and if possible, the account itself.

Directors question the associations account being out of state and want to include an additional signer. Are the concerns warranted? How do we move forward in the best interest of the association?

How do other small boards handle their checking accounts? 2 signers on each check? 2 signers but with 'and/or'? One signer? Do other small boards use separate accounts for 'reserves'?

Thank you!

Any suggestions on amending bylaws or removing provisions regarding the checking account and the out-of-state-ed-ness of our affairs will be warmly welcomed!

FredS7 (Arizona)
Posts: 927

Posted:

Set up a new account, move the funds to the new account, and have two authorized signers. End of story.

If your treasurer with "health issues" dies, does that mean you have no access to the funds? Think about it.

LetA (Nevada)
Posts: 2,679

Posted:

I would have 3 of the 7 directors as signatories on the account, President, VP & Treasurer along with the PM if you are managed. And yes, move the account in state.
get this done ASAP, God forbid the treasurer passes and your funds are held up in probate.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Having only one authorized signer on account is bad, as you're aware. What happens if your treasurer dies suddenly? The bank will not turn over any funds to anyone else even if you have checkbook in hand. **This needs to be remedied ASAP.**

Having to travel out of state to retrieve funds is crazy and is tempting fate. Our banks are local, but they also permit online viewing and transactions. Our bylaws don't address this issue specifically. If yours do, you'll have to amend them (usually involves drafting the amendment, getting it approved by the owners [often needs a super majority, such as 67% or 75% to approve], then recording the approved amendment). If your governing docs do not address it, then the board should draft and approve a policy re: prudent handling of association funds. May as well include a prudent investing policy for your reserve funds while you're at it.

Do you have a property manager? The owner of our property management company is an authorized signer on our funds, and the manager herself is authorized to cut checks out of operating funds. Board members view and audit the monthly statements (and of course we carry enough fidelity insurance - also known as employee dishonesty insurance). Our reserves require the signatures of two board members to withdraw funds. It becomes a nuisance to have to keep this updated as board members rotate on and off the board, but you gotta do it. The owner of the property management company is authorized to close the reserve accounts in the event of an emergency, but cannot cut checks or initiate any other kind of transaction out of these accounts.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Tammy,

You are living on borrowed time with your current approach.

Move accounts to a local bank - one that you can visit to sort out issues - and, ensure three people are on the checking account. I would also insist on two signatures for anything over a certain amount.

The local connection will allow you to weather issues like the death of an officer.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

While not paranoid about having an out of state checking account, I would move it locally for convenience sake.

I agree with having two signers, typically the President and the Treasurer. More than two can get out of hand especially come transfer time to new BOD Members.

TammyC3 (New Mexico)
Posts: 102

Posted:

Ohhh, We've thought about it! We've researched banks, branches and proximity. It's a doable thing. But resistance by the 'old guard' is a slow and grinding process. We are the newest of the directors. How can the board 'make' it happen when the treasurer resists?

GeorgeS21 (Florida)
Posts: 3,808

Posted:

It is the Board’s decision, not the treasurer’s decision.

TammyC3 (New Mexico)
Posts: 102

Posted:

ASAP - agreed. "Probate" was actually part of our board's conversation!

Thus far, common sense has been an ineffective tool! The treasurer is very resistant. I was hoping for a statute, so no argument could be made!

Is there a way for the board to 'insist'?

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Tammy,

You VOTE!

This isn’t magic, just hard work.

TammyC3 (New Mexico)
Posts: 102

Posted:

We've got a long list and 'checking account' just shot to #1!

None of our unsigned, undated and/or unavailable for review bylaws (soon to be a topic) address banking, reserves or locality. We aren't really sure what bylaws we're governed by! It's a hot mess. A properly executed set of bylaws is also on 'the list', now with the note: prudent handling and investing policies. Thanks!!

So glad you mentioned 'investing' reserve funds. Our secretary brought that up too! She had researched and found that interest could be earned on an account at our closest national bank! Affirmation. (The treasurer reminded us that 'interest earned' would increase her tax filing responsibilities.)

No property manager. The annual assessment per lot is $50.00. Our association can barely afford to pay attention!
The board did ask for bank statements. That didn't go over well! We had to cite state statute to get action. Then only one statement was sent. It's apparent that no one ever asked before. We don't suspect that there is any malfeasance by way of 'missing funds', but we became aware of 'lost funds' through (what I'll kindly call) improper interpretation of our governing documents. Thousands were lost (yet another topic!).

Reserves require two signatures to withdraw funds. Check.
I don't think the board will mind the nuisance of updating once a year. They'll sleep better all year! At least I will!!

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Tammy,

I'm not understanding.

You have a Board for a purpose - to manage the association, including to make decisions via voting. It sounds like you have a very basic problem.

Convince the others to vote with you at the next board meeting and specify where the account will be - relieve the treasurer if need be.

Am I missing something?

TammyC3 (New Mexico)
Posts: 102

Posted:

I agree, we ARE on borrowed time. But man o man, our treasurer is not a team player. The new directors have already shaken the board's tree pretty hard. I guess we're in for another round.

Three people on account. Two signatures for anything over a certain amount (this should make the treasurer more comfortable!). Perfect!

TammyC3 (New Mexico)
Posts: 102

Posted:

No George, you aren't missing anything. I'm facing a huge learning curve. Does it show?!

I'm here to learn as much as I can from experienced & knowledgeable people.

Right now, the board isn't sure of what decisions it can make. Undated, unsigned and previously unseen bylaws that restrict the board's powers (i.e. removal) have popped up in our email and are now being reviewed.

No convincing needed. The new directors understand the problem. Directors voted in January (before these new 'current' bylaws showed up in our email). What are we supposed to do now? Drive over, meet w/a police officer and retrieve the records? (We've considered it.) We can't force her to sign a check. We're trying to solve problems George, not create new ones.

I am one of the newest landowners. I've never been a director, much less an officer. I was (improperly) elected to VP of the board (by the membership), at our last annual meeting. The 5 newest directors first focused on current income levels, because they had fallen below 2007's 'viable income levels' (the year the declarant released control). Then the 5 newest directors focused on the improper voting procedures. Annual income has been 'corrected' and is increased by over 12%!! *Voting has been 'corrected' (to the best of our ability at this time). Hostility has ensued. We've got a lot on our plate George. Please be patient while we muddle through.

TammyC3 (New Mexico)
Posts: 102

Posted:

That's exactly what I said at our last meeting! TWICE!

TimB4 (Tennessee)
Posts: 21,059

Posted:

Is the account in the Associations name or the individual's name.

If in the Associations name, a letter from the secretary should be all that is needed.

However, as others have said, the account should be at a bank all can get to.

SueW6 (Michigan)
Posts: 814

Posted:

1. Elect a co- treasurer.

2. Open an account at a new bank near the HOA. Signees include pres, new treasurer, another member. The old treasurer can add his name later.

3. Motion at a meeting directing the current Treasurer to close out the current account and transfer funds into the newly established bank account.

4. New checks will be issued. The old treasurer can direct the co- treasurer for a short while on what bills need to be paid. When he gets in town then he and the co- treasurer can figure out how things are going to be handled.

5. Establish a new policy that Treasuer must be a full time resident.

( Bring corporation letter, approved minutes of the appointment and motion to the new bank. )

Dont ever let the tail wag the dog again!

RoyalP
Posts: 1,104

Posted:

TimB4
(Virginia)

Posts:16184

03/16/2019 5:24 AM Quote Reply
Is the account in the Associations name or the individual's name.

If in the Associations name, a letter from the secretary should be all that is needed.

However, as others have said, the account should be at a bank all can get to.
SueW6
(Michigan)

Posts:451

03/16/2019 8:54 AM Quote Reply
1. Elect a co- treasurer.

2. Open an account at a new bank near the HOA. Signees include pres, new treasurer, another member. The old treasurer can add his name later.

3. Motion at a meeting directing the current Treasurer to close out the current account and transfer funds into the newly established bank account.

4. New checks will be issued. The old treasurer can direct the co- treasurer for a short while on what bills need to be paid. When he gets in town then he and the co- treasurer can figure out how things are going to be handled.

5. Establish a new policy that Treasuer must be a full time resident.

( Bring corporation letter, approved minutes of the appointment and motion to the new bank. )

Dont ever let the tail wag the dog again!

DITTO

TammyC3 (New Mexico)
Posts: 102

Posted:

We have established that the account is in the Associations name.

I (personally) begin to wonder if the account isn't the original 'developer' account. Unsure if it's relevant.

TammyC3 (New Mexico)
Posts: 102

Posted:

That's ^ a cut and paste for our next meeting!! Thanks!

The tail has been wagging the dog for a decade. Anyone who approaches the dog while holding a leash has been bit! We are now trying to determine if the dog is just neglected, if it's just mean, or if it is rabid. In any case, there's a kennel in it's future!

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