It’s 10pm. Do you know where your association’s money is?

Commingling money by those entrusted with it professionally is an often-illegal and always-unethical practice. Surprisingly to some, the management of community associations isn’t governed by real estate statutes in Missouri. What is illegal under our state’s real estate statutes is unfortunately too commonly a practice in community association management.

I’ve never had the displeasure of working for a company that commingled its clients’ funds, nor will my company ever do so. I can only speculate the reasons for those who do. Perhaps it’s laziness and not wanting to keep up with so many accounts. Perhaps they’re skimming interest off of their clients’ funds. Perhaps they’re leveraging it as if it were their own asset.

But a greater question than their motives for doing so: Are they putting their clients’ funds at risk? Without bank statements attached to every financial report, how can you be sure the company isn’t operating a Ponzi scheme? What happens if one of their clients’ spends into the red; are their bad habits being supported by your association’s funds? What would happen if all of their clients made a run on them at once? What happens if the company is sued? Are their clients’ funds properly designated as being in escrow and thus protected from the management company’s potential liabilities?

If my concerns on commingling sound trivial, you can read for yourself just one example from here in Missouri why they’re warranted:

Kansas City Business Owner Pleads Guilty to Embezzling $750,000 from Homeowners Associations

Frankly, there’s just no good enough reason. No matter how much cheaper the management company’s services may be and no matter how many promises they make, no community association should ever entrust their community’s funds to a company that commingles their clients’ funds. Period.

If your management company isn’t providing a copy of the bank statements with each monthly financial report, it’s time to start asking tough questions. If you’re shopping for a new community association management company, you owe it to the homeowners of your community to ask if they commingle funds and dismiss them as a bidder if they do.

A. Jenning Properties, Inc. never commingles clients’ funds. Every client has an operating account in the name of the association, and bank statements accompany our financial reports every month for full transparency. If you’re in the market for management services and you don’t know who else to trust on this issue, just ask. I will gladly provide the board with some names of my competitors who share my opinion on this unethical practice. I would much rather lose the business to a competitor I know to be ethical and reputable than to see any potential client make would could be a catastrophic mistake with a less ethical one.

Commingling poses potential harm to community associations throughout Missouri, and its practice causes harm to the reputation of our industry as community association managers. I’m determined to do my part to change that, not only by refusing the practice in my own business but also in supporting competitors who share my disdain of the practice.