Question regarding MC and bank account(s)

I am the treasurer of an HOA that is not new, but is just learning to function well for the first time this year. We are a very new board and have lots of questions. So far, we have made several mistakes, but fortunately we are learning A LOT from them. One of the larger mistakes we have made is allowing our (TERRIBLE) MC to manage our money alone. Very recently, we had the President of the Board added to the checking account, which I monitor VERY closely. There have been discrepancies, and other issues with the mismanagement of our funds. The MC even deposited our opening monies in his own business account and shorted us more than $2000 when he transferred the funds to our new account. I am aware that this is illegal, and to date he has replaced the money and blamed it on incompetent help.

We are completely unable to get out of this crazy contract with the MC that was signed one month before I was elected. So my question is this: I want to open another account in addition to the operating account maintained by the management company. I would like to have this second (savings)account accessible to the board members, but not the MC. Then every month we would withdraw all money from the operating account in excess of $2000 and add it to the savings account. This way, the MC would only have access to $2000 or less of the HOA's money at any given time. Is this acceptable, allowed, or common practice? Which board members should be authorized signers on the savings account?

I really appreciate any guidance and experience you could offer.

Thanks Brad. We have contacted more than one lawyer. All claim that the contract is in fact one-sided and should never have been signed by the previous board. There is a portion of the contract that prohibits "comingling" funds on the part of the MC which he clearly did. We tried to fire him but he insists that we should buy him out of his contract which he knows better than anyone we cannot afford to do. It would cost a lot to take him to court and legally terminate him, and unfortunately our HOA does not have this type of money. It looks like we are stuck with him for eighteen more months as so far we are only six months into a two year contract. Right now I am looking for the most cost-effective band-aid for this awful situation, and one that gives the HOA control of most of our own money. As far as my concern, I am babysitting every tiny financial move he makes (hopefully making him want to quit) and I don't think he will try to walk away with any more money, at least not if he doesn't want to be reported to the authorities.

Rose:

The option you have if he clearly violated the contract is to tell him his is done and refuse to pay him anymore. Then the ball is in his court whether he wants to go to court to try and sue you or not. If he is involved in criminal activity chances are he will cut his loss and leave. Of course this is a calculated risk. He isn't going to go quietly, he wants his money. He may however, get very tired of being "forced" to do his job the right way and decide it isn't worth the money.

You don't have to go to court to get out of the contract. You can refuse to pay him and tell him he is done, that may cause him to initiate court proceedings. Is there a state agency that oversees management companies in your state? Contact them, contact your local BBB, put some heat on this dude.

For future reference never, ever, accept a contract from another party at its face value. As someone who issues 70-100 contracts a year for facility usage I fully expect revisions to come back because our contracts are very heavily slanted in our favor. Every company that does contracts has wiggle room built in, there are certain things they won't budge on, but often times they will on a lot of it. The goal shoudl be to get the contract to a neutral point where it is equally beneficial to both parties.

We have special checks and ledger to help monitor and control our money. ALL checks take a 2 signature system. There has to be 3 signatures altogether on the checks written. The MC signs and issues the checks AFTER board approval. (Unless it's normal operating costs like utilities, insurance payments, etc...) That check then has to be signed by 2 approved check signers registered at our bank. That usually is the President, Vice-President, or Secretary. Which changes out every year. Atleast 2 of them have to sign the checks as well.

Some may say the banks don't check etc...Ours did check and if your bank isn't, then change banks or discuss the issue with them. It worked for us in making sure all the checks were tracked and knew where they were going. Any special project expense was openly discussed at our OPEN meetings for members to know where the money was going. It isn't the board's money but it's the WHOLE HOA membership money. Always be open even when the arrows are flying...

Rose,

Are you associated with a poster by the name PaulaM4?

I ask because the questions and background are similar. Even if you are not associated with them, you might gain some inside from that thread:

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/123314/view/topic/Default.aspx

Tim,

Paula is our Secretary! I am very new on here and had no idea how to link the two threads. Thanks!!

Rose Anne