Lock box for assn. assessments

You may find it helpful to review the information on this web site:

http://www.ckfraud.org/lockbox.html

Hope it helps. It will not answer all your questions. Nevertheless, it is a good summary.

Thanks for the link George. It was interesting read this perspective. When there are a large number of daily deposits and fast access to funds is necessary there are advantages. But are these needed by your HOA? Many large HOA management companies do promote the use of a lockbox because it provides them a greater profit margin by reducing their work. Meanwhile for the HOA it creates an additional expense or loss of interest income (usually hidden from the HOA). Saving this cost to the HOA is why we chose not to recommend the use of a lockbox to our clients. Does anyone have status on how often there is fraud, or inaccurate reading of micr code? What about the irate homeowner when they receive a delinquency statement because their payment was stolen or was not properly recorded?

As our ad states: "Our money handing procedures remove possibilities for theft." This is a minor part of that process.

Our former MC required it at a cost to the HOA as Roger mentioned and while it might be cost effective for some of the mega-associations our 132 units didn't really justify it. You can also have direct deposit without the lock-box, check with your financial institution.

We have 125 units, quarterly assessments. I haven't gotten far enough to it to know what the fees will be. I just feel that we need to make changes and am exploring our options before beginning the discussion with fellow board members.

As background-
We have had three property management companies in 15 years and in each case they were resistant to providing a breakdown of fees charged, produce monthly financials. All were almost condescending and defensive when asked about the budget, to explain financials, etc. I have only recently become active, but have seen them embarass board members at annual meetings for asking questions about the budget, seen e-mail that was bullying. Our boards have not been demanding or demeaning to the PMs from what I have seen. To the contrary, that may be part of the problem, maybe they gave their authority over to the PMs and created monsters.

I am going to propose that two Board members sign checks, rather than the PM. We don't even get copies of bank statements. I don't suspect any wrongdoing, but think this just makes sense. It would provide a checks and balances, as well as let the Board be more hands on in knowing what is being spent on a monthly basis.

We also have been having the PM produce the required audited financial statement each year. This makes no sense to me. Again, not because I suspect wrongdoing. But the response that I get from the PM and treasurer is that we have to save money and I just don't understand because I am not a CPA. We have a small budget, it wouldn't cost that much- and what is the point of an audit that is conducted by the entity being audited?

I don't see a lockbox as an answer to all of our problems, but a potential tool in bringing offering professionalism and transparency to our collections process.

Thoughts?

I too would be very suspect of the practices you have described, the MC or PM works for the Association, not the other way around. Also the Association can rent a P.O. Box for a small fee and for a nominal fee most financial institutions will mail out duplicate statements or many institutions have the information available on-line; all you need is log-in info and a password. For the situations you have described, IMO a lock-box will do you little good as long as the MC has unfettered access to your funds. Please tell me you at least require the MC to post some type of fiduciary bond to protect the Associations funds. In addition to the coverage under the Associations insurance our CC&R's also require:

Section 2.10. Fidelity Bonds. The Board shall obtain fidelity bond coverage with respect to any person who either handles or is responsible for funds held or administered by the Association, in an amount no less than the maximum funds that will be in the custody of the Association or its management agent at any, time while the bond is in force. Provided, however, the fidelity bond coverage must at least equal the sum of three months’ assessments on all living units in the project, plus the Association’s reserve funds. A management agent handling funds for the Association shall also be covered by its own fidelity bond, at the sole cost of said agent, naming the Association as an additional obligee. All bonds shall provide for ten (10) days’ written notice to the Association before the same may be canceled or substantially modified for any reason.