Access to Association Bank Accounts

Our three-year property management contract expired in March (we are operating on the auto-renewal outlined in the contract when they didn't present us a new contract). We just received the updated version they want us to sign ASAP, which we ae delaying until we review and negotiate.

The current board did not sign the original contract. In looking at the contract, we realized that we do not have access to the association bank accounts. This is a full-service property management account where they provide all employees and do all of our accounting. We have access to the monthly financials and maybe the bank statements (I have to check with the treasurer). But we don't have signing authority on the bank accounts - it's their bank and their accounts.

Obviously this isn't ideal, but I was wondering if this is standard practice with large property management companies. This is a pretty big regional company so they must do this with all of their properties (and there are a lot of them in the area) but I'm just curious if it's done at other companies.

Other than a few minor bookkeeping issues, we have not had any issues with the accounting with this company.

The other concerning thing is they want to change the method of depositing money. The old contract had them depositing monthly fees directly into the association bank account. Now the terms say they can put the money into their bank account, co-mingled with other funds from other associations, and then pull it out as necessary.

Needless to say we have a lot of negotiation to do before we sign again.

I own a management company in California. Each HOA's board of directors will sign a signature card for their operating account. The bank is of our choosing, which is located in Arizona and specializes in HOA's across the country. Each community has their own bank account, we just oversee all of them. Each of our communities have signing authority, but none use it. All checks written by us from their operating account are signed by us. Reserve accounts, by law, are signed by two officers of the corporation.

Monies from dues are deposited via lockbox. Escrow deposits are done via FedEx. No monies are ever co-mingled. My personal and business bank accounts are with another institution. I do have a few accounts that have requested read-only access to their accounts and I have set them up for that.

Each account is reviewed annually by an independent CPA.

Lori,

I don't like those situations, however it is common.
Max explained how his company works but didn't really go into the reasons why.

Worst case being that the MC and Association part badly and it takes longer then it should to gain access to your funds.
I worry about the worst case (as there have been instances in the past within the world of HOAs/COAs).
I also suspect laws have been changed that hopefully minimize the occurrences.

We had a book keeper or a CPA do our finances.
However, they only kept the books and deposited checks (local bank).
The Board signed the checks and were the only ones on the signature card.

Perhaps this will be helpful:

Protecting Your Association Funds - What you need to know From a Chicago Management Company

Best Practices - Financial
Operations from CAI

The reasons why? Unlike someone who might be a Treasurer for their self-managed HOA, we handle bookkeeping for HOA's up and down the State of California. The bank we use provides us free services, which we pass unto our client, free of charge of course.

I provide service to 65 accounts. If I were to send checks out to 65 boards for signature and then have them mailed out to the receipt ants, that would be a disaster. What we do is scan all invoices and load into a Board only web portal for them to approve. Once approved, check is signed and mailed. All utility and insurance payments are set up on autopay because you only have 20 or less days to pay.

Can management companies embezzle from HOA's, yep, but then, so can self-managed HOA's.

That article from "a Chicago Management Company" is pure horseshit.

Lori

Any reputable company would have you sign signature cards. Yes, there are issues with management companies not cooperating during a transition, but the same thing happens when a previous board doesn't transition over to a new board.

A management company, like a lawyers, should never, ever be co-mingling funds. Boards need to be "experts" when they go shopping for a management company. They need to be experts on how an association is supposed to be run. It's like trying to create a spreadsheet in Excel, you have to know the answer before you create a faster process.

Nice article. Excerpt:

The management company earns interest on the Association’s funds. With the bank account in the name of the management company, all interest earned is the property of the company.

I had not even thought of this. Excellent point, given that reserve funds are often on the order of hundreds of thousands of dollars and banks are paying meaningful interest again.

?

Max "Non Sequitur" B4