Reserve Account Transfer Authorization

I'm new to this forum. Thank you for your feedback!

I'm working for a property mgt company that does not obtain authorization from a board member prior to writing or transferring money from the Reserve account. We have a form on file that the President of the HOA signed which allows PM to transfer money at anytime between operating and reserve. When a reserve invoice comes in, the PM pays the invoice from the applicable account (that is, no further approvals). The PM states they received approval when the bid was approved at the Board meeting and that's good enough. I'm having a really hard time with this. The head of the PM told me everyone does this and no one gets a board members further authorization if the bid had been originally approved during the board meeting.

I'm really not comfortable with the liability around this and the CC&Rs are follow the Davis Sterling Act, with the exception of this form authorization I note above. Thank you for any insight!!

Why are you having a hard time wih this? The documentation of the action seems more than sufficient. The authority to pay from the reserve account seems to be there.

Thank you!!

Post-o. I meant to say this forum has a few managers who have posted here for years et cetera.

thanks for the feedback! I will say, with most of the associations, funds are transferred from Reserve to Operating then checks are written. However, there is not an approval to do so. It's more along the lines of, well, we don't have enough funds in the Operating so let's transfer $25k from reserve to operating without an approval. The approval I suppose is this blank form from the bank that the president signed stating PM has authority to transfer, write checks, etc.

Please do cite the requirement for two signatures, Heidi..

It's also true that in CA, reserves only may be used to pay for things listed in the reserve study. So to cover shortages in the Op. budget is not legal:

https://www.davis-stirling.com/HOME/R/Reserve-Expenditures#axzz1e4sYibvg"

"QUESTION: Does an expenditure from the reserve account require board approval? 

ANSWER: Yes. Reserve accounts are given significant protections by the Davis-Stirling Act. Associations must set up bank accounts that are separate and distinct from their managing agent's funds and separated into operating and reserve accounts.

Spending Restrictions.

Boards may not spend reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain. (Civ. Code § 5510(b).)

BUT, If the Board approved the expenditure-transferring funds form reserves to the op, budget to cover expenses, at an open meeting and this approval is recorded in the approved meeting minutes, then what? Wouldn't that be OK?

I have the feeling that the two-signature rule or statute is no longer required, but I can't confirm that.

I believe there is an accounting methodology where all funds are deposited to the Reserve fund and when needed to pay an invoice, money is transferred form Reserve to Operating and the invoice is paid. I actually think there is a name for this type accounting. I also believe it is done to keep the Reserves high when it is collecting interest.