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Subject: Treasurer or Property Management Company
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MatthewM8
(Virginia)

Posts:5


09/13/2019 1:09 PM  
My HOA is looking at property management companies, since no resident really has time to handle most board responsibilities. I am on the board. The exception is the Treasurer, who has time to do the Treasurer responsibilities.

We have been talking to one property management company, and they say that they would prefer to handle the financials, since doing the day to day things would be difficult if they did not have the financials at their disposal. Their concern is they don't want to have to get the Treasurer's approval every time they need to do something.

The Treasurer doesn't want to give up the financial responsibilities, because he doesn't want to just give our financials away to someone we don't even know that well.

I can understand both perspectives. My question is, how do most HOAs handle this? I am very new to being on the HOA board. Do most HOAs with a property management company let the company handle financials? Or does the Treasurer continue do it? Or is there some other arrangement I'm not aware of?

Thanks for any responses, I'm just trying to get a handle on this.
ChadH3
(Alabama)

Posts:12


09/13/2019 1:15 PM  
How big is your HOA and what kind of amenities do you have? If you don't have issues with members paying dues or issues with covenant enforcement, there really isn't much use for a management company if your treasurer is good handling the financials.
MatthewM8
(Virginia)

Posts:5


09/13/2019 1:24 PM  
Our development is not huge, maybe 50 residences. But we need help with stuff like repaving the parking lot (road), dealing with other contractors like trash collection and snow removal. It's just that no one really has the time to plan this and scout out contractors. The property management company said they can do a barebones of handling things like this for $13/month per unit. That seems fair enough for the time it will save board members--works for us, anyway.
CathyA3
(Ohio)

Posts:509


09/13/2019 3:07 PM  
Property management companies often have a menu of services, and communities can choose which services they need.

Points in favor of moving the financials to an experienced manager:

* They're professionals (not saying your Treasurer isn't) and can provide a broad array of services that are targeted to community associations.

* You're not dependent on one person. It sounds like you would have issues replacing your Treasurer if he suddenly become ill and couldn't do his job, for example. With a good PM company, if your manager became ill suddenly, he/she would be replaced with someone who has a similar level of knowledge and skills. Bills would get paid and accounts balanced with barely a hiccup.

* It's another set of eyes on your books. It's harder for a board member to embezzle association funds if he needs to collude with the manager. Again, not saying your Treasurer is doing any such thing, but what happens when he's no longer there?

* Experienced PMs will also have contacts for other professional financial services such as auditors, tax preparers, and the like. This is helpful for communities that are trying to do everything in house.

I understand your Treasurer's reluctance to put your finances in the hands of a stranger. However, there are protections against the consequences of getting a bad one, such as fidelity or "employee dishonesty" insurance which already may be required by your governing documents. And having a professional do your books doesn't mean that the board no longer looks at them; the board should always review the monthly statements at a minimum. Finally, you can put controls on the manager's activities (ie, size of checks that can be written or the number of signatures required) that can head off problems before they start.

In short, I think it's smart to move your financials outside when you're a smallish community with homeowners who don't want to get involved. You just need to choose your manager wisely: interview, get references, read what's floating around on the web.
MarkW18
(Florida)

Posts:196


09/13/2019 3:56 PM  
Posted By MatthewM8 on 09/13/2019 1:24 PM
Our development is not huge, maybe 50 residences. But we need help with stuff like repaving the parking lot (road), dealing with other contractors like trash collection and snow removal. It's just that no one really has the time to plan this and scout out contractors. The property management company said they can do a barebones of handling things like this for $13/month per unit. That seems fair enough for the time it will save board members--works for us, anyway.


Most MC's will do full management for between $10-$15 per door. To make a couple of calls a year at $650.00 per month, they should be knocking down your door.
TimB4
(Virginia)

Posts:16542


09/14/2019 1:12 AM  
Personally, I don't agree with having someone outside of the Board handle the financials (i.e. having access to bank accounts). If you think it's a good idea, then give me full access to your personal checking/savings and trust me that everything will work out.

However, having served as treasurer, I know it can easily take 20 hours a month to do (self managed, 130 lots).

That said, many MC do handle financials.


There are many levels of financial assistance. Our Association did hire a bookkeeper to track assessments and make deposits (as you don't have to be on the bank account to do that). The Treasurer would still have custody of the checkbook, pay the bills and make the reports.


If the MC won't do the job without the financials, I'd look elsewhere (as that may be a sign of future issues).

If you decide to have the MC do financials, make sure that the accounts are in a bank chosen by the Board and all board members are on the signature card (at the bank). Additionally, the bank statements should go to the board, not the MC.

That is my 2 cents. Had Richard still been part of this forum (as he owns a MC), he would have a different perspective.
CathyA3
(Ohio)

Posts:509


09/14/2019 5:04 AM  
Posted By TimB4 on 09/14/2019 1:12 AM
Personally, I don't agree with having someone outside of the Board handle the financials (i.e. having access to bank accounts). If you think it's a good idea, then give me full access to your personal checking/savings and trust me that everything will work out.




No offense, but you're just some rando on the internet. :-) Note that I said the board should always interview, check references, and vet the person they hire. Experienced PMs with a track record of providing excellent service is not the risk people are making it out to be.

We give access to our accounts to strangers all the time - we just don't think too hard about what we're doing, and we don't know how many employees at our banks and other financial institutions already have access or can get it if they try. And never mind what happens when our accounts are hacked or when the Equifaxes of the world make our personal data available to all and sundry.

As I'd mentioned, there are already steps a board can take to offset the risk of trusting the wrong person. Fidelity insurance protects you from the consequences of having your funds embezzled, and my community's governing documents requires us to carry an amount of insurance that covers all of our funds. A good PM may also carry insurance as well - losing an association's funds to a bad employee is a good way to not stay in business, and a smart business owner isn't going to want that to happen.

And finally, keeping your books in house is no protection against a Treasurer who is also a bad actor. You see the guy regularly, you assume he's on the up and up, but we've all heard stories about board members who make off with association funds. It's a false sense of security.
MelissaP1
(Alabama)

Posts:8711


09/14/2019 5:41 AM  
This is opposite what we did. We had a paid accounting firm to handle our expenses and be a POC for the board. Our HOA handled all the day to day activities. Did not find the load of finding contractors that unbearable. We had a rule they had to be licensed/insured and had to get 3 bids. We then vote on them at a board meeting. Anyone was welcome to bid if they met the criteria even if HOA member. HOA members could even offer up contractors as well.

Maybe the Treasurer should be President instead? They seem to be the most interested party in your group. For me, reading your post it seemed you all need help more on how to manage than hire management. Seems to be a lack of management skills which may effect your relationship with an MC if you were to hire one. The lines between HOA and MC often get blurred. HOA members later finding a sense of loss of control if not keeping an eye on their store.

Too bad Richard isn't here... He'd had good advice if he'd kept it to his profession.

Former HOA President
MarkW18
(Florida)

Posts:196


09/14/2019 8:35 AM  
There are a number of other industries and businesses that employ outside companies to handle their day -to-day financial operations. All of these companies have been vetted or should have been.

If some believe that you never turn over your financial operation to someone outside the Board, then the question should be, who vets the people on the Board?
TimB4
(Virginia)

Posts:16542


09/14/2019 10:11 AM  
The only way to protect against embezzlement is to have a policy of checks and balances and actually follow that policy.

An external audit or financial review is also needed every year or two.

Keep in mind, this only catches the embezzlement, it doesn't prevent it.
JohnC46
(South Carolina)

Posts:8827


09/14/2019 10:29 AM  
Our PM handles all our money ($90K yearly) and pays our bills. Our monthly dues ($70) go to a bank lockbox then to the PM. We have two Reserve funds (different banks) which account for about 20% of our budget. Our PM makes monthly deposits to these reserve accounts but they are not allowed to make withdrawals. Only our PRES and Treasurer (requires both) can make withdrawals. The reserve banks send monthly statements to our treasurer who distributes them to the BOD. The statements are also part of our PM's Monthly Financial Report.

We get a 30 or more page monthly Financial Report from our PM. It shows every penny coming in and every penny going out. This report goes to each BOD Member and an owner can get a copy by simply requesting one. Our largest cost (about 30% of budget) is landscaping and that is done via a company contracted to the BOD, but paid by the PM. If our PM was ever late in landscape payments, the landscaper would be all over the BOD.

The Pres and Treasurer have a method to immediately stop the lockbox bank from transferring money to our PM. In order for the PM to embezzle, the BOD would need to fall asleep.

Most HOA embezzlement stories I see are a "trusted member of the BOD" was the embezzler.

A lesson I learned many years ago. Cheaters cheat and will always find a way to cheat.
MarkW18
(Florida)

Posts:196


09/14/2019 10:51 AM  
The lockbox account should be that of the HOA bank account, so why would the money go from the lockbox to the PM account?

It is great that Associations set up checks and balances, but, so it doesn't happen in the first place, how do HOA's vet their directors/officers?
JohnC46
(South Carolina)

Posts:8827


09/14/2019 11:51 AM  
Posted By MarkW18 on 09/14/2019 10:51 AM
The lockbox account should be that of the HOA bank account, so why would the money go from the lockbox to the PM account?

It is great that Associations set up checks and balances, but, so it doesn't happen in the first place, how do HOA's vet their directors/officers?




The lock box account is in the name of the HOA but all money it it funnels to the PM. Our HOA has two accounts in separate banks for our reserve accounts. Designated as General Reserves and Roofing Reserves. Why two banks? We had a 40% dues increase this year to be used for roofing and one of the promises we made was the dues increase would got strictly to roof replacement so some felt a separate bank account showing this alone would make people comfortable. I saw no need for such, but I went along with the majority.

Our procedure and PM has worked well for us for 5 years. Personally I believe we are simple enough (no amenities at all) to be self managed but as we are unable to find anyone in our association willing to take it all over (myself included), we will remain as is.

As far as vetting directors/officers, we have to go begging every Annual Meeting for people to be on the BOD so our vetting process is you raised your hand....LOL
MarkW18
(Florida)

Posts:196


09/14/2019 12:01 PM  
If you funnel money to a PM's account, that is where problems arise, this based on personal experience. Nothing wrong with having reserves in multiples, as long as the Association knows where the accounts are and who has legal access. One account can be really available without penalty, the other generating interest, huge interest at this time!
CathyA3
(Ohio)

Posts:509


09/14/2019 12:42 PM  
If you're looking for a perfectly secure way to handle your accounts, you won't find one: there is no such thing. It's the board's job to manage risks. You take steps to avoid problems as much as possible, and you take steps to minimize the damage when a problem does occur (such as carrying fidelity insurance).

With a trusted board member in control, I believe it's easier for a board to become complacent. After all, who are you more likely to keep an eye on: a professional manager who isn't your buddy, or good ol' Joe down the street who has been doing a great job for several years now?

But you don't know that Joe's wife has had a serious illness, they're drowning in medical debt and desperately trying to avoid declaring bankruptcy while pretending that everything is fine. It would be foolish, not to mention cruel, to give someone in such a position access to a pot of money. But you don't know. On the surface nothing has changed.

Or maybe Joe has begun to show small signs of the onset of dementia. Those who don't live with him won't see the occasional questionable judgement, or the moodiness, or the occasional mistakes with money. You've known Joe for years, you still see the guy you used to have a beer with, not the guy that he is becoming. You just keep chugging along, trustingly.

This is how trouble starts.

GenoS
(Florida)

Posts:3328


09/14/2019 7:26 PM  
Posted By MarkW18 on 09/13/2019 3:56 PM
Most MC's will do full management for between $10-$15 per door. To make a couple of calls a year at $650.00 per month, they should be knocking down your door.

My HOA is in a county that's not exactly huge but there are a good number of HOAs. When we were shopping for an MC last year the lowest cost provider we found offered 3 tiers: $15, $25 or $35 per door. The $15 tier was anything but "full management". I wouldn't even hazard a guess about what $10 per door would get you.
MarkW18
(Florida)

Posts:196


09/14/2019 7:33 PM  
I wonder what kind of service you get for $35.00 per door and an HOA with 1000. If my math is correct, that's $35,000 per month. I hope they throw in free weekly car washes for at least one car per unit.
MatthewM8
(Virginia)

Posts:5


09/17/2019 3:10 PM  
Thank you everyone for your responses. Fidelity insurance sounds like a good way to go when hiring a property management company. I will bring that up with our board. Thanks!
CathyA3
(Ohio)

Posts:509


09/17/2019 3:35 PM  
Posted By MatthewM8 on 09/17/2019 3:10 PM
Thank you everyone for your responses. Fidelity insurance sounds like a good way to go when hiring a property management company. I will bring that up with our board. Thanks!




Just a quick note: my community's Declaration requires us to have fidelity insurance, whether or not we employ a property management company. This insurance protects our funds from all the bad actors out there, including rogue board members.

Even without the requirement in our Declaration, I believe having such insurance is smart. No matter how diligent the board is in managing the HOA's funds, some things are just outside of their control. I sure wouldn't want to be on the board when the money disappeared.
PestY


Posts:0


09/17/2019 3:43 PM  
..... Our Association did hire a bookkeeper to track assessments and make deposits (as you don't have to be on the bank account to do that). The Treasurer would still have custody of the checkbook, pay the bills and make the reports. .....


PERFECT

the association could, in addition, have the mgmt co PREPARE the checks for the treasurer's signature
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