how to handle money situation

Started by BarbaraD6 • 10 replies • 1200 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

BarbaraD6 (Florida)
Posts: 347

Posted:

We have had problems in our townhouse community of the reserve accounts being used as a bank account.The morning after our last meeting the manager sent an urgent email stating we had over $250,000 in our reserve and it needed to be moved as it isn't FDIC insured. He then called me to get my vote and said 2 of the 4 board members voted to move it. He was going to move it into the "operating" account until we had a meeting to discuss where to put it. I agree with the other 2 bod and he said he was moving the money. He didn't wait for the 4th BOD to vote.

1st issue- The bylaws say "Any action to be taken or which may be taken at a board meeting may be taken without a meeting if all directors sign a consent in writing, setting forth the action so taken. Such consent shall have the same force and effect as a unanimous vote". The vote wasn't in writing and the 4th BOD thinks the vote had to be a unanimous one. What does everything think about this?

2nd and most important issue- The manager took $30,000+ more than he asked to move in the email and his phone call.(fraud to me) I just found this out after receiving the financial report last night. One BOD member last night said its not reserve money anymore since its not in a reserve account.The members have to vote to move reserve money, did the members need to vote on moving it in this issue?I am thinking about sending a letter to the BOD and manager tomorrow demanding the money be put back into the reserve account until we get legal advice.IF I'm ignored as usual what should I do. HELP, what would you do in this situation?
Barbara

JosephW (Michigan)
Posts: 882

Posted:

You've got two issues here and you're only considering the one - the actual movement of the money and how it was handled. Don't forget the reason for moving it while you're trying to straighten this out. I'm, assuming the manager moved the money into the operating account as the total in that account would be less than $250k, thus making sure that both accounts were FDIC insured (I'm also assuming that they were in different financial institutions).

OK, as to the way the movement was handled. The board acted on a perceived "urgent" need to safeguard the funds. Whether the bank was about to fail or not, who knows, but the need to make sure the money was safeguarded is paramount.

The key now is to straighten it out. As long as the "reserve" money is not spent on operating expenses, it's still "reserve" money, irrespective of the place it's actually residing. For example, if an association had $50k in one bank account, but the financial reporting accounted for $10k as reserves, then that $10k would have to be treated as reserves, but might not have to placed in a separate account. State laws or individual association documents might make it a requirement to put reserves into separate accounts, in which case those must be followed.

Concentrate now on getting the correct amount of reserves back into an account where they are protected. Then set up a policy for handling this type of thing in the future.

Joe

Joseph West
Official HOATalk.com Sponsor
Community Associations Network, LLC
www.CommunityAssociations.net
*See legal notice below (end of page) or go to www.hoatalk.com/legal

SusanW1 (Michigan)
Posts: 5,202

Posted:

IMHO your Treasurer should have been the one to flag this issue an make these calls/arrangements - then direct the manager to move the funds with his/her signature.

What's up with the Treasurer?

BarbaraD6 (Florida)
Posts: 347

Posted:

Susan,
We don't have a treasurer. We are a BOD of 4 but should be 5.
Barbara

BarbaraD6 (Florida)
Posts: 347

Posted:

Joseph,
The reality is their was no "urgency". The bank wasn't failing. According to our bylaws(I put it in my post) was the vote valid if your opinion. Can a manager be given authority to take a certain dollar amount and take a much larger amount? The comments made by 2 BOD and manager lead my fellow BOD member and I that they are going to use that money as operating money. Yes, they have moved money before without our vote. I am greatly concerned about this money.
Barbara

DonnaS (Tennessee)
Posts: 5,671

Posted:

Barbara,

I see a red flag all the way up here. The Reserve Funds cannot be used as operating money UNLESS the entire membership votes to remove it from Reserves and it passes by your required vote. That is Statute law. The P.M is in error.The Board does not have the right or ability to move it out of Reserves, even if it is temporary.

If the FDIC coverage limits are $250.000 and your fund is higher than that, then you remove the excess amount and put it into another, seperate Reserve fund. This is not operating money.!!!

What is your Board quorum? I would suspect with a required 5 BOD, it would have been 3 members, not 2. Also, get a 5th member appointed to the Board. An even number such as 4 is always the possibility of a Board tied vote.

Issue #1. It says that "all Directors must agree in writting." That was not done.

Issue #2 If that money is not put back into another Reserve Account today, I would notify the P.M., the other Board members and the association attorney that this has been done. It is against the law on the P.Ms part.

BarbaraD6 (Florida)
Posts: 347

Posted:

Donna,
I see a red flag too.The 2 BOD knew it was done(at the meeting they made reference to the $50,000 we had in operating account)This is the reserve money. You answered my concern that even temporary the BOD doesn't have the authority to move it.
thanks
Barbara

JohnK3 (Pennsylvania)
Posts: 967

Posted:

I'd take a deep breath then follow Joe's advice.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Barbara,

The urgency at which this was handled is what is bothersome. Like Joe said, the funds can be moved from Reserve account to another Reserve account with out much ado. But it cannot go into operating accounts. We had a cap of $200.000 into each Reserve account in seperate banks just to protect the funds.

One Director wanted to invest them in a annuity someplace and was told by our legal counsil that this is not allowed unless there is a guarantee that there can be no loss of the original funds. We then went to shorter term C.Ds

So I say, get those funds out of operating funds and redeposit them into another Reserve Fund account.

GlenL (Ohio)
Posts: 5,491

Posted:

Barbra in addition to the advice you've already received the FDIC limit is per bank not per account. This is an aggregate amount under your TIN (Taxpayer Identification Number) even if you have multiple accounts under $250,000 limit at any one bank, it doesn't matter if the accounts are at multiple branches. For more concise information go to: http://www.fdic.gov/

Studies show that 5 out of 4 people have problems with fractions

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By GlenL on 03/17/2009 9:10 PM
Barbra in addition to the advice you've already received the FDIC limit is per bank not per account. This is an aggregate amount under your TIN (Taxpayer Identification Number) even if you have multiple accounts under $250,000 limit at any one bank, it doesn't matter if the accounts are at multiple branches. For more concise information go to: http://www.fdic.gov/

Glen,

In a nutshell, if your's is a single account, then all your accouts totaled together cannot be more than $250,000. However if it's a joint account, the $250,000 is for each person. POD accounts are calculated differently as are trust accounts. It's very easy to be insured for more than $250,000. However, in the case of an HOA, which would be like a single account, $250,000 is the limit.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here