Our PM company contract states only they can draw from our funds.

Started by WendyM5 • 8 replies • 289 views

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WendyM5 (North Carolina)
Posts: 1,522

Posted:

Below is what our PM contract states. I read a thread on here where a PM company went out of business and the HOA could not get any of their funds. What do I need to change so in the event of an emergency we can get our funds from the PM? We are currently only given the last 4 digits of our bank accounts.

The Agent shall be the only party authorized to draw upon the operating account. Agent shall not be held liable in the event ofbankruptcy or failure of such depository. Such operating account shall not be required to bear interest. Agent shall deposit collect and pay expenses of the Property on behalf of the
Association in accordance with the approved budget from the operating account. Notwithstanding anything within this paragraph to the contrary, the Association understands, acknowledges
and accepts that Agent utilizes a single wholesale merchant account for the purposes of processing electronic payments for all of its clients. Funds into or out of this account are reconciled on
a monthly basis and funds to the Association are made not less than weekly.

Also what is a single wholesale account and should my HOA board be concerned about that?

vis ta vie

TimB4 (Tennessee)
Posts: 21,061

Posted:

As I understand it (and I could be incorrect), the PM runs the funds through a third party who deposits them.

These funds are not available to the Association for another week.

Personally, I am against the PM controlling the money.
However, depending on the Association, having them do this can make it easier on everyone.
It's also likely that insisting on the PM not having full control could limit your choices on companies willing to take you on as a client.

If the board is not controlling the funds directly, I would (at the very least) insist that the Reserves are deposited in a local account that only the board has access to. The PM can make deposits (money transfers into the account) but not have full access.

I forget how large of a development you are.
When I was on the board, it was 130 units and the board hired a bookkeeper to keep the accounts and make the deposits.
The Treasurer controlled the check book and paid the bills.
All board members were on the signature card at the bank.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By TimB4 on 11/27/2022 2:27 PM
As I understand it (and I could be incorrect), the PM runs the funds through a third party who deposits them.

These funds are not available to the Association for another week.

Personally, I am against the PM controlling the money.
However, depending on the Association, having them do this can make it easier on everyone.
It's also likely that insisting on the PM not having full control could limit your choices on companies willing to take you on as a client.

If the board is not controlling the funds directly, I would (at the very least) insist that the Reserves are deposited in a local account that only the board has access to. The PM can make deposits (money transfers into the account) but not have full access.

I forget how large of a development you are.
When I was on the board, it was 130 units and the board hired a bookkeeper to keep the accounts and make the deposits.
The Treasurer controlled the check book and paid the bills.
All board members were on the signature card at the bank.

thanks that makes sense. our dues are only about $200/year with little amenities.

vis ta vie

MaxB4
Posts: 3,513

Posted:

Wendy

You should have the Board sign a signature card with the bank, so in the event anything happens, you have access to your funds. I do it for all my clients. Our firm is the only agent to pay funds through their operating accounts. The Board will sign checks, but will not write them on their own.

Being the treasurer of a self managed HOA is not the same as having a MC run the day to day affairs of the Association. It is night and day.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By TimB4 on 11/27/2022 2:27 PM

When I was on the board, it was 130 units and the board hired a bookkeeper to keep the accounts and make the deposits.
The Treasurer controlled the check book and paid the bills.
All board members were on the signature card at the bank.

so what does having the board members names on a signature card exactly do? Can a single board member drain the bank account? Do all 3 board members need to sign to make withdrawls. probably varies from bank to bank. LOoks like I need to call my bank.

vis ta vie

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By WendyM5 on 11/28/2022 7:24 AM

so what does having the board members names on a signature card exactly do? Can a single board member drain the bank account? Do all 3 board members need to sign to make withdrawls. probably varies from bank to bank. LOoks like I need to call my bank.

It allows any board member to write a check or have access to the account.

Very helpful when vacations arise.
Extremely helpful should the worst happen.

All board members had to show up at the bank at the same time to make this happen.

BarbaraK (Florida)
Posts: 36

Posted:

Only our Board members are permitted to sign checks from any of our accounts. It takes 2 signatures to approve. Our PM isn't permitted to sign any checks. The PM sends us all invoices but we are the ones that sign the checks.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Our PM controls our finances with dues payments made to a bank then the money transferred to the PM. The PM prepares a monthly financial report over 30 pages long. It show every single penny of income and every single penny spent. This report is sent to each member of the BOD monthly and available to any owner upon request. They do not control our Reserves (2 accounts) other then being able to make deposits to. Is there some liability in this system? Yes as there is in any system. Cheaters cheat no matter the system. No system if full proof.

People say well we need two (3) signatures. Well what if those two or three are in cahoots? There goes your money. Wave Bye Bye.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By JohnC46 on 11/29/2022 1:31 PM
Our PM controls our finances with dues payments made to a bank then the money transferred to the PM. The PM prepares a monthly financial report over 30 pages long. It show every single penny of income and every single penny spent. This report is sent to each member of the BOD monthly and available to any owner upon request. They do not control our Reserves (2 accounts) other then being able to make deposits to. Is there some liability in this system? Yes as there is in any system. Cheaters cheat no matter the system. No system if full proof.

People say well we need two (3) signatures. Well what if those two or three are in cahoots? There goes your money. Wave Bye Bye.

This is good advice. An annual budget with spending audited annually is good practice. It's much riskier to have local volunteer board members handling money directly, especially micro-managing boards.

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