Reserve Account Accounting

California law requires that two board members sign all checks written against reserve accounts. Property managers may not sign on these accounts. While the management company may set up reserve accounts for board members, boards often open and maintain these accounts at banks they select. When boards establish reserve accounts, it is important that the board or treasurer do the following every month:

  • Promptly send the original bank statement to the management company so that transactions can be recorded and reflected on the monthly financial statements,
  • Provide the management company with W-9 forms,
  • Provide the management company with copies of all checks written, and
  • Provide the management company with copies of all contracts and invoices supporting checks that have been written.

If the board fails to provide the bank statements and check copies, the association's monthly financial statements will not be accurate and the cost of any CPA review will be increased since the CPA will be required to collect the information and make accounting adjustments.

Failure to provide the management company with contracts and invoices will result in the management company not having possession of information and documents that may be needed for future board and management company decisions. In addition, it will make any future audit difficult and more costly.

Boards may eliminate the need to perform as set forth above by doing the following:

  • Instructing the bank in which reserve funds are deposited to automatically send the month-end statements to the management company, and
  • Authorizing the management company to write, but not sign, all reserve checks, while collecting and maintaining the applicable contracts, invoices, and W-9 forms before payments are made.

Pacific Reserve Studies