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Authorized Signers
QUESTION: Should all five board members be authorized signers on our bank accounts?

ANSWER: Unless your bylaws state otherwise, that is a decision each board can make for itself. Some boards put all directors on bank signatures cards to ensure that at least one director is always available to sign checks. Others restrict the number of authorized signers for stricter control of expenditures.

Number of Signatures on Checks. For reserve accounts, checks must be signed by at least two directors. For operating accounts, there is no statutory requirement for board signatures but there may be in the governing documents. Some HOA bylaws require the signatures of two directors on all checks, some require at least one officer's signature but most are silent on the issue.

Managing Agent. When documents are silent about check signing, many associations allow their managing agent to pay routine operational expenses such as utility bills, insurance premiums, contracted services (pool cleaning, elevator maintenance, cable TV, etc.) without director signatures. To limit their agent's check signing authority, boards require that any unusual expenses or expenses above a certain dollar amount first receive board president authorization or full board authorization or the signature of at least one director. The procedures vary from association to association.

RECOMMENDATION: The authority to transfer funds, whether given to managing agents or limited to directors, creates potential for unauthorized transfers. To protect the association's funds against embezzlement, boards must (i) be diligent in reviewing bank statements and reconciliations, (ii) establish internal controls, (iii) carry a fidelity bond, and (iv) conduct annual independent reviews.

MANAGEMENT COMPANY
REQUIREMENTS


QUESTION: Our bylaws require our president to co-sign all checks. However, our management company contract includes verbiage that they have authority to sign checks for all bills authorized by the board. Our president was not aware of his duty and hasn't co-signed a check in the 3+ year history of our HOA. Which takes precedence--the management contract or our bylaws?

ANSWER: Your bylaws control. Management contracts are typically permissive, i.e., the management company may sign checks, whereas bylaws are usually mandatory--the president shall co-sign checks. If your management contract is mandatory (the company must co-sign all checks), then it is time to renegotiate the contract. If the company refuses, it's time for a new management company.

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