Board access to HOA bank accounts

I've read where a lot of HOA boards have their president and treasurer authorized on their HOA bank accounts. From what I've read there are a lot of good reasons to do this. In our case, no one on the board has access. I brought this issue up and the response from the president was:

"Personally, I don’t want my name on the accounts—I don’t need one more liability with this job.
We can ask for a copy of each month’s statements for Treasurers to review."

Anybody have any thoughts on this subject? For me it seems like common sense that someone from the board should be authorized and that we owe it to our community to ensure that no fraud or erroneous payments are occurring.

Thanks Geno. The read only option is good to know. Currently, we get a spreadsheet from the management company at our monthly board meetings. A spreadsheet would be easy to manipulate if someone wanted to steal. Having a copy of the monthly bank statements would help.

I'll think some more about this tonight, but here is what occurs to me right now:

* if you're a self-managed HOA, I don't think you have a choice. Those with a manager have a more leeway, and the manager and board can act as checks and balances on each other - this mitigates risk as long as folks keep their eyes on the books each month.

* We've done it both ways. Our operating and initial reserve accounts were set up back when the developer was in control, so no homeowner board member had their name on the accounts. This is still true today. Last year we had to open a second reserve account to stay within insurance limits. I actually opened the account myself. I was the president but had spent part of my career at a major brokerage firm and knew my way around finance, so it made sense for me to handle it.

* You can set up the accounts to require multiple signatures for various transactions. That way no one director can take off with the money.

* You may want to take into account how knowledgeable a director is and how comfortable he or she is with money matters. You should also think twice if you know something about the director's personal situation that causes you to question their ability to resist temptation. Hopefully you won't run into something like this - but I think that no matter how honest a person tries to be, dangling temptation in front of someone having money troubles is kind of cruel as well as unwise.

* One issue with having board member's names on the account is that you have to keep up with changes as people move onto and off the board. It's a bit of a nuisance.

* Re: liability, it goes with the territory, I think, and there are things you can do to address it. I assume the HOA will be carrying enough D&O insurance as well as fidelity insurance to protect against employee dishonesty. I also beefed up my personal insurance when I was elected to the board - maybe overkill, but I want to sleep well at night.

So in general, I think the answer is that it depends on your community's needs and on the individuals on the board of directors. With proper safeguards, having board members' names on the account shouldn't present unusual risks.

And it can develop into something more than a nuisance. When we were chasing down statements for our reserve accounts, two of them had been opened a number of years ago and the 2 directors' names on the accounts had left the community. The banks wouldn't even let our current officers and directors change the names on the accounts or even the official mailing address unless those original people were present to sign off on it. We eventually got it straightened out but to say it was "a bit of a nuisance" is an understatement.

It's something to stay on top of from year to year as your board changes.

John,

We put all our board members on the signature card for the bank.

However, only the treasurer usually accesses the account (online, deposits, etc.).

If you don't want your name on the account, simply tell the board that.

John,

I advise all of my Association clients to have each of the officers as authorized signatories on their accounts, and that dual signatures be required for any check over a modest amount, e.g., $50.00 or $100.00 or whatever the client is comfortable with.

Each Board member should also have electronic access to all Association bank records.

Just a quick Googling of HOA (or Association) theft will give you all the reasons....

Good suggestions from Cathy.

A few more:

* Bank statements should be mailed directly to a BOD member. Not hard for a dishonest PM to send you something that started as a Bank statement, but has been cut and pasted.

* Even if you set things up for 2 signatures, the boiler plate in many banking agreements shifts all liability for only one signature to the HOA. Many banks will process a check with only one signature.

* If possible, make sure you have a couple of people on your BOD who know how to read financial statements.

All directors should receive regular monthly bank statements.

No directors should have check writing authority when there is an independent management company handling the monthly cash flow backed by an independent annual audit.

That should go on the list of suggested questions to ask prospective board members, whether they're running in an election or seeking appointment to fill a vacancy.

If they are signers, they have access to the account. Those BOD members can go into the bank and get a bank check. Although it may be rare, there are times when a BOD needs to take control from a poor performing MC.

We did exactly that a couple of months ago. I mentioned elsewhere that we didn't have control over 3 of our reserve accounts. The signers on those accounts were long gone and none of the officers or directors had the logon info to access them online. Our previous bookkeeper transferred the info required for online access to our new PM at the start of the year. The new PM's bookkeeper swore she couldn't find it, and so we were shut out of our own bank accounts for a few months. During that time they were unable to provide us with full and accurate monthly financials because they didn't have access to the accounts for reconciliation, either.

We finally had a few past and present board members take 2 whole days to visit the banks and get everything squared away. The day after we did that, the new PM's bookkeeper "found" the online passwords. We fired the PM first chance we got after that. While that wasn't the only reason we fired them, it was the last straw. The new PM opened new bank accounts in our name at the end of December before their contract with us officially started. They never told anyone here they were going to do that, nor did they inform us about them until February. In retrospect, that was the first straw.

How many of you spend any time thinking about fidelity (theft) insurance?

Let's say you have $400k in the bank. Your MC has $5M in insurance. Maybe you think you're covered.

Think again. If your MC has 100 clients with an average of $250k in the bank each, that's $25M that's potentially at risk.

One of the best ways for a PM to avoid detection is to move money among the different accounts as needed to keep you and other HOAs fooled.

By the time that these thefts bubbles up to the surface, the PM could have stolen $10M already. The $5M insurance isn't going to cover it all.

I personally believe that at least one member of the board should have access to all bank accounts. Especially if you are using a property management company to manage your property and receive fees from owners and disbursing funds. Whether it's the President, Vice President, and/or Treasurer. We have all heard about the nightmares that HOA boards have had with regards to permitting the Property Manager/or company to receive funds and write and sign checks for disbursements. Then you have one bad apple and the HOA loses tens of thousands of dollars.

There could be a number of legitimate reason for re-classing items. First management job I took, they used a third party accounting company and the managers did the GL coding for all of their own properties. Some managers didn't understand the need for accuracy and adjustments had to be made. Other times, you could have had a CPA while do the annual review of audit that caught certain mistakes. Fortunately they were caught and corrected.

Shoot, didn't realize it's an old thread.