Community Associations Institute - New England Chapter  
  CAI National Website
Member Resources
About CAI-NE
Program & Event Overview
Industry News & Forms
Sponsorship & Advertising
Why Join CAI-NE
Helpful Resources
  Condominium Statute
  This Month's Q & A
  This Month's Feature Article
  Resource Directories
Career Center
Media Magazine
Legislative Update

Video: This is CAI

M-204 Community Goverance
July 27 2017  - July 28 2017
(Natick, MA)
Business Partner Essentials
July 27 2017  - July 27 2017
(Hampton Inn, Natick, MA)
Condo Media Board Meeting
August 8 2017  - August 8 2017
ELN - Managers' Summer Social
August 10 2017  - August 10 2017
Condo Media

Thursday, July 27, 2017
July 2017 View Previous Q & A
To Authorize or Not?

Question: What are the advantages and/or disadvantages of designating the association’s manager (or management company representative) as an authorized signer on the operating and reserve accounts?

Answer: You are talking about two different accounts, and CPA Kenneth Bloom, a principal in Bloom, Cohen, Hayes, suggests a different answer for each.
On the operating account, giving the manager blanket approval to sign checks makes sense, he says, “and that’s the way it works with 90 percent of my clients.” Most of the operating expenses are routine and recurring (utilities, landscaping, insurance, etc.) and the amounts involved in individual checks are usually fairly small. Requiring a board member to co-sign all the checks “slows the process down,” Bloom says, and sometimes results in late fees, because bills aren’t paid on time. Board members should keep a close eye on association finances, he agrees, but they can do that by reviewing the monthly financial statements “and understanding them.” If trustees see questionable expenditures, “they should question them.”
While the risk of losing large sums through inappropriate operating expenditures is relatively small, Bloom notes, that isn’t true of the reserves. Notorious bank robber Wilie Sutton’s explanation for why he robbed banks (“because that’s where the money is”) applies to the reserves, Bloom suggests: It’s in their reserve accounts that associations are likely to have the largest sums and face the greatest fraud risks.
For that reason, he doesn’t think managers should have sole authority to withdraw reserve funds and most managers don’t want that authority, he says, because “their potential exposure is so great.” The best practice, recommended by most industry executives, is to require two signatures on reserve withdrawals, and Bloom thinks the manager should be one of them.
“That’s the optimal structure for reserves,” he suggests. Requiring multiple signatures in itself reduces the fraud risk, Bloom explains, because everyone would have to go along with it. But having authorized signers who are adversaries, or at least have different interests – which would be true of the manager and a trustee, Bloom suggests ── creates a stronger deterrent than you would have with two trustees.“Nothing is guaranteed,” he says, “but having the manager and a trustee look at every reserve disbursement minimizes the possibility of collusion.”
Condominium owners and board members typically assume that the manager poses the biggest fraud risk, but in fact, Bloom notes, “a board member is just as likely to steal from the association.” Nonetheless, some boards are so concerned about limiting their managers’ access to funds, they don’t want them even to receive bank statements – an unnecessary and counterproductive policy, Bloom believes. “The manager is supposed to maintain the financial records,” he notes. “If they don’t have access to the bank statements, they can’t do their job.” Managers who don’t receive bank statements also can’t easily spot theft by other board members, Bloom notes. He recommends requiring a duplicate set of bank statements – one for board members and the other for the manager. “That keeps everyone honest.”
He adds one cautionary note to the discussion of requiring multiple signatures on bank accounts: Most banks won’t notice if the required signatures are in place. “It will be up to the manager and the board to enforce this policy,” Bloom notes, “because the bank isn’t likely to.”

  © Copyright 2004, Community Associations Institute (CAI). All rights reserved.
Usage Restrictions
Web Site users may not copy, reproduce, modify, use, republish, upload, post, transmit or distribute in any way material
from the Web Site without express written permission of the CAI New England Chapter.

Brookline Bank is locally based and has a history of providing a high level of personalized service to condominium associations, management companies and other real estate-related organizations.

We are long-standing members of CAI-New England and have the capabilities and experience to deliver a broad range of financing, deposit, and cash management solutions to your association.


Dedicated to the practice of Real Estate and Condominium Law for over 30 years.

Concentrating in condominium and real estate law in MA and RI.

The Right Attorneys to Call Before the Wrong Thing Happens.


When it comes to representing condominium associations, we do it all…

 ▪ Drafting and amending condominium documents
 ▪ Handling collections
 ▪ Dealing with developer transition issues
 ▪ Negotiating and reviewing contracts
 ▪ Handling association bank loans
 ▪ Land acquisition and disposition transactions
 ▪ Representing associations as plaintiffs and defendants in all manner of legal actions

A Commitment to Your Success

One of the leading firms concentrating in all facets of condominium and real estate law

Built upon meeting the daily and long-term goals of our many satisfied clients