AB-2912

January 28, 2020

Association Finances AB2912 signed into Law by Governor Brown
Effective January 1, 2019

 

What this new law will mean for Board Members and Property Managers – The bill is designed to prevent fraud and embezzlement related to association finances. This bill will also indirectly meet the mandatory coverage requirement for FHA certifications.

Mandatory Fidelity Insurance – A Fidelity bond is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. In this case it protects the Association and homeowners from dishonest acts by Board Members, Employees, and Managing Agents.

Requirements of AB2912 –

• The act requires a managing agent of a common interest development who accepts or receives funds belonging to the association, upon written request by the board, deposit those funds into an interest bearing account in a bank, savings association, or credit union in this state, provided certain requirements are met.

Note: This bill will prohibit transfers greater than $10,000 OR 5% of the association’s total combined reserve and operating account deposits which ever is lower without prior written approval from the board.

• This bill requires Monthly review of the following:

A) A current reconciliation of the association’s operating account and Reserve Account

B) The Current year’s actual operating revenues and expenses compared to the current year’s budget

C) The latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.

D) An income and expense statement for the association’s operating and reserve accounts.

E) Check register, monthly general ledger, and delinquent assessment receivable reports.

Note: The review requirements may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member review the documents and statements described independent of a board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.

• Management Companies and agents must be listed as additional insured on the Crime/Fidelity Bond.

• The associations Fidelity Bond shall include computer fraud and funds transfer fraud.

• The Bond must be equal to three months assessments plus reserves. (We suggest the Fidelity Bond to cover ALL funds in the operating and reserves).