Access to Association money by non-Board people

I'm sure you know the answer to this, but in case you have to read it - ask questions, lots of them and make it clear you will not shut up until you get answers and the board take immediate steps to fix this. If you're on the board, you have to go a little rouge and tell the homeowners about this because the financial stability of the association is at a huge risk for fraud and embezzlement.

how long has this been going on? Where are the checks and balances to ensure every quarter that comes out of that account is going for association business? Who is reviewing the monthly account statements? Why isn't the reserves in a separate account (if you want both accounts at the credit union, that's fine). And so on.

If you get any answers, push for an audit by a CPA who has no ties to the community - let's see if the responses stand up to independent scrutiny. In the meantime, I would get rid of the debit cards and suspend these people from doing any work until the audit comes back clear and the board has established some internal checks and bala. The accountant and the credit union (and your association attorney and m water insurance carrier) can't help with drafting policies and protocols.

Any pushback, you may need to leave the board and shout some more. The homeowners need to respond to this by pressuring the board big time - and push for a recall if the board doesn't act. Good luck and fasten your seat belts, This could be rough.

Some of this would concern me as well, although not all of it.

It's not unusual for a PM to be an authorized signer on association accounts if they're in charge of collecting assessments and paying bills.

A debit card is a different issue since it's basically the same as cash - I wouldn't even want board members to have them if they're not responsible for paying the bills. A credit card may be OK, but in general if someone incurs re-imbursable expenses, I prefer that they pay for these up front and have a check cut after the receipt is turned in. It boils down to how many eyes are on financial transactions and having an obvious audit trail.

As for insurance, the HOA itself should have something called fidelity insurance, also known as employee dishonesty insurance. The amount needed will be based on things like annual assessments, total funds currently under HOA control, and the like. In addition to fidelity insurance, your HOA will also be carrying things like liability, directors & officers, and possibly workers comp insurance. Your CC&Rs/Declaration should require this (mine do) - look for a section titled Insurance. The property management company should also be carrying insurance on their employees, but that's to protect them in case an employee does something wrong and the HOA sues the PM.

Yes, you should have separate accounts for reserve funds. For one thing there are different rules governing reserves (for example, they can't be used for operating expenses, and pooling the funds makes it too easy to ignore this). And as a practical matter, you probably won't need the reserve funds for a few years, which means they can be invested in CDs and earn a little interest - something you can't do with the operating funds.

I also agree with pushing for an audit. In fact your bylaws may require an annual audit (mine do).

General impression: Your financial processes and controls need improvement, and I'd expect a competent PM and board to understand these things.

If you ever get traction on the subject of separating reserves into a separate bank account, then I think what the HOA should do is withdraw an amount that represents a "contingency fund" (a.k.a. "operating reserve," which is different from the main reserve account and is the "cushion" for fluctuating operating expenses during the year) and put this much smaller amount into another bank account.

We have a number of large projects planned in out years, and I've gotten a line item in our FY2022 budget, which was just approved on Monday, to have a Reserve study done so the yearly saving for those projects has a foundation.

Our By-Laws require our regular monthly assessments to be such that we don't use special assessments to pay for things, and for each year's budget to include, at a minimum, an amount that's 10% of the yearly operating budget.

I have yet to tackle the financial management of how much of our money is split between checking and the money market account on a monthly basis.

To the best of my knowledge, the only person right now who can transfer money is our bookkeeper, but she has only done that once, and left a large amount in checking, which is exposed to the debit cards.

I want as much as possible in a completely separate Reserve account because I don't want to wake up one day to find money has disappeared, no one knows why, and our insurance won't cover it because non-Board members had access.

I sent the other director an email laying all of this out and stating that I'm not good with the current situation. That was before I really started working on what our options to fix it are. As always, no reply. He and the PM are both original owners and friends, and I'm pretty sure he shows the PM my emails.

The other person, who held the officer title of Treasurer, but did nothing, resigned earlier this week. She, like the other Board member, is also one of the originals, and as far as I could tell, took her cues from him. So, as a practical matter, I still have to get this other person to agree to any proposal.

What I have now is a PM with a debit card and a bookkeeper with single signing authority, full access to all our money, and a debit card. Neither is on our Board, neither is, to the best of knowledge, bonded/insured (beyond whatever personal liability they might have under their own homeowners), and the bookkeeper isn't a Member-Owner of our Association.

Do I trust them, here and now, today? Yes, I do. But as the CEO (which our By-Laws say I am), I do not think the current arrangement is an acceptable way to run our Association. I'm also not wild about paying for insurance for the two of them, although I imagine that's one of the options to address the risk that exists.

My preferred solution, as I've been thinking about this, is to cancel all debit cards and change the check-signing to require two sigs, the bookkeeper and the Association Treasurer, or, in the absence of that position being filled, the President. That solution, while adding a bit of cumbersomeness and delay in paying what invoices require physical checks, is free. And it returns some oversight to the Board, as well, which has never been done.

Our bookkeeper was the signature on our checks. They cut the checks and then we had 2 officers sign each one. The bookkeeper was a member but regardless was paid to cut checks. So I don't see a problem there having the ability to sign off hand.

Plus did you want the "PM" to be an enemy? Doesn't make sense as your HOA is made up of you and your neighbors. So you going to complain that the PM is next door neighbors with the book keeper as a reason not to be trust worthy?

I had in mind how those who do financial reviews/audits/et cetera often have a list of recommendations, such as two people must sign checks over a certain amount.