LoriM15 (Florida)
Posts: 1,009
Posts: 1,009
Posted:
Does anyone have a sample policy they use for transferring HOA funds from one account to the other? Our governing documents do not have any specifics and we do not have a formal policy. This has luckily not been an issue because we have an extremely honest treasurer, but he's a control freak. We recently had an issue where a large amount of money got transferred by mistake (it was actually a series of mistakes) and several of us board members realized we have to put some guard rails on the treasurer's power because it might no always be him there.
Specifics - large HOA so we have a property management company with an accounting department that does accounting for us. PM gets the invoices, codes them with the GL code and uploads them to the approval system. Treasurer and I look at the bills and do a check approval. We have an operating account and reserve account at the property management company preferred bank. But we also have an "excess cash" account and reserve account at Morgan Stanley. So once monthly dues come in, the treasurer moves money from the bank to MS because that account pays more. Then if we need to pay a big bill, he moves money back. He makes several transfers a month to maximize interest. He does this with a phone call to our MS rep and even though there are two other authorized signers on the MS account, the rep says she will only transfer for the treasurer because he's he only one she knows. In effect, he has money going back and forth several times a month. We don't have an investment committee (he's it) so he also decides to invest the money in CDs when he feels we have too much cash.
This week a series of mistakes happened. We had a $500k bill for our road resurfacing that needed to be paid. Treasurer made a phone call and moved that large amount with no official approval, like he always does. PM coded right GL code, but not the right bank account. First mistake. Treasurer and I didn't catch that and both approved the check (second mistake). Bank told accounting the accountant the account was going to be overdrawn, so they sent a ticket to the PM to approve a funds transfer to cover it (third mistake - PM should not approve funds transfers). PM didn't notice the money was going to be transferred from MS instead of reserve account at bank (fourth mistake). ACH request went to MS, who moved the funds without any kind of authorization (fifth mistake). The only reason this was all caught was because our rep at MS would have had to cash out some investments to cover the whole amount. Money was already gone by the time she saw the flag. MS is of course saying they did nothing wrong. The PM and management company are owning up to their mistakes. I think there's plenty of blame to go around.
The money is now back in the right place. But it is apparent that we are not fulfilling our fiduciary duty by having a treasurer who can basically do whatever he wants with the money whenever he wants. I'm probably the guiltiest because I trust him and knew a lot of this but didn't want to rock the boat.
We need to have a process with signature authority for transferring money besides him making a phone call and that also will protect us if something like this (basically an unauthorized signer with the right account and routing number) tries to pull money again. Can anyone point me to a good governance document for this?
Specifics - large HOA so we have a property management company with an accounting department that does accounting for us. PM gets the invoices, codes them with the GL code and uploads them to the approval system. Treasurer and I look at the bills and do a check approval. We have an operating account and reserve account at the property management company preferred bank. But we also have an "excess cash" account and reserve account at Morgan Stanley. So once monthly dues come in, the treasurer moves money from the bank to MS because that account pays more. Then if we need to pay a big bill, he moves money back. He makes several transfers a month to maximize interest. He does this with a phone call to our MS rep and even though there are two other authorized signers on the MS account, the rep says she will only transfer for the treasurer because he's he only one she knows. In effect, he has money going back and forth several times a month. We don't have an investment committee (he's it) so he also decides to invest the money in CDs when he feels we have too much cash.
This week a series of mistakes happened. We had a $500k bill for our road resurfacing that needed to be paid. Treasurer made a phone call and moved that large amount with no official approval, like he always does. PM coded right GL code, but not the right bank account. First mistake. Treasurer and I didn't catch that and both approved the check (second mistake). Bank told accounting the accountant the account was going to be overdrawn, so they sent a ticket to the PM to approve a funds transfer to cover it (third mistake - PM should not approve funds transfers). PM didn't notice the money was going to be transferred from MS instead of reserve account at bank (fourth mistake). ACH request went to MS, who moved the funds without any kind of authorization (fifth mistake). The only reason this was all caught was because our rep at MS would have had to cash out some investments to cover the whole amount. Money was already gone by the time she saw the flag. MS is of course saying they did nothing wrong. The PM and management company are owning up to their mistakes. I think there's plenty of blame to go around.
The money is now back in the right place. But it is apparent that we are not fulfilling our fiduciary duty by having a treasurer who can basically do whatever he wants with the money whenever he wants. I'm probably the guiltiest because I trust him and knew a lot of this but didn't want to rock the boat.
We need to have a process with signature authority for transferring money besides him making a phone call and that also will protect us if something like this (basically an unauthorized signer with the right account and routing number) tries to pull money again. Can anyone point me to a good governance document for this?