I object to this system on grounds that the board will be allowing a third party that is not a member of our association to have access to our bank account. Since the management company will control the checks, sign said checks and reconcile the bank account, it seems like an ill-advised distribution of power to me. Is this becoming an industry practice, and are the public auditing firms in agreement with these new systems?
—Worried in West Caldwell
“The association should consider implementing this system only with respect to the operating account. Further, management should only have access to, and be able to draw checks or otherwise transfer money out of, the operating account. The association should consider retaining sole access to the reserve accounts and deferred maintenance accounts in an effort to prevent co-mingling. In addition, the association must receive bank statements directly from the bank (or have direct online access to bank statements through the bank's website). The board should review these statements and reconcile same with the checks drafted each month, ensuring that both the payees and amounts of the checks are correct. The board should crosscheck the invoices approved on line to the actual payments made. The board should also approve all contracts and require that the approvals be recorded in the minutes. Finally the board should ask management what their internal controls are over the use of the electronic signature.
“The online approval system should be able to identify exactly which board members approved each invoice and corresponding payment. The association should also ensure that the management company has the appropriate types and amounts of bonding and insurance in place and should be required to notify the association immediately in the event of any reduction or cancellation of appropriate coverage. With respect to changing the by-laws to implement this new system, the association should carefully review all concerns with their counsel to ensure that all of the desired protections are clearly set forth in the amended bylaws.”