Reserve Account

Started by BreeL • 5 replies • 1243 views

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BreeL (Texas)
Posts: 2

Posted:

Our new management company wants access to all of our checking accounts and the reserve account. The Board approved granting them access to these accounts. It has been 6 months since we hired them and their have constantly been late paying our bills which have resulted in thousands of dollars in late fees and penalties. They have also requested money from our reserve account on two occasions to cover late payments and operating expenses which were above our monthly budget totaling approximately $50K. I was under the impression that the reserve account cannot be used for operating expenses or capital expenses. As treasurer, I removed their access to our reserve account out of fear of them depleting the reserve account to cover operating expenses.

Does an Association need to grant the management company access to the Reserve Account?

FredS7 (Arizona)
Posts: 927

Posted:

> Does an Association need to grant the management company access to the Reserve Account?

You have bigger problems, because the management company isn't doing its job (paying bills on time).

For a professional management company- I would expect them to eat the late fees the first time and replace some staff the second time.

DavidW5 (North Carolina)
Posts: 565

Posted:

I suggest you go here:

http://www.cairf.org/research/best_practices.aspx

and download the CAI Financial Operations Best Practices document (free). The section under "banking" should answer your questions regarding control of access to reserves.

TimB4 (Tennessee)
Posts: 21,047

Posted:

I would have never given them access to the accounts. If you think it's a good idea, then send me your personal checkbook and financial information (which I'm sure no-one would do).

SusanW1 (Michigan)
Posts: 5,202

Posted:

Do you have a cash flow problem? WHY is the MC having to borrow money to meet monthly expenses? Is the Reserve Fund being reimbursed in a timely manner?

PS: not paying bills on time is unacceptable - HOWEVER, if there is a serious cash flow issue, it might be understandable. Do you have a financial committee that can sit down with the MC and find out what's going on. If not, hire a bookkeeper to attend the meeting to ask the right questions.

FrankM7 (Pennsylvania)
Posts: 61

Posted:

I trust you have directors and officers insurance to protect you and other directors when your association members realize the management company hired by the board is costing unnecessary expenditures from both of your accounts. The reserve account is there for future capital expenses such as repairs and replacement of equipment, roofs if applicable, and fixtures as planned and scheduled over a 10 or 20 year time frame. It is somewhat acceptable to borrow from the account, however, payments must regularly be made back into it over the short term. It's not your association's personal lending institution.

The board should have never given them total access to either account, but should have regularly deposited funds into a special bill paying account thus keeping control of the association's money.

Your need to change management companies should be a priority along with legal advice to cover your liability.

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