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, at least two directors must authorize the transfer of funds from reserve accounts. For operating accounts, there is no statutory requirement for board signatures but that requirement could be found 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.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.