View Full Version : LMSC Financial Compliance (LMSC Standards F2)

August 9th, 2013, 12:49 AM
Here is another topic for our review and discussion.

From the 2012 LMSC Standards survey results, we found that 81% of LMSCs report that they are meeting the requirement related to LMSC Financial Compliance as described in F2:

"LMSC bonding insurance provided by USMS, which covers LMSC officers, requires the following: (a.) Bank accounts be reconciled annually by a person other than a person who is authorized to sign checks (b) Dual signatures are required on all checks of $5,000 or more."

How does your LMSC succeed in meeting this requirement?

What challenges or obstacles have you encountered as you attempt to meet the requirements of F2?

Thanks in advance for taking the time to provide your feedback.

- The LMSC Mentoring Subcommittee

August 9th, 2013, 11:16 AM
Below is an excerpt from what is on the Internet about this issue:

"The Davis-Stirling Act does not require two signature bank accounts but, rather, two -signatures (a small but important distinction):
The signatures of at least two persons, who shall be members of the association's board of directors, or one officer who is not a member of the board of directors and a member of the board of directors, shall be required for the withdrawal of moneys from the association's reserve accounts. (Civ. Code 1365.5(b) (http://www.davis-stirling.com/MainMenu/Statutes/CivilCode13655/tabid/897/Default.aspx).)
There was a time when banks helped boards comply with the statute, i.e., a bank employee compared signatures against a signature card before processing a check. Because all banks now use bulk filing, inclearings and automated processing, two-signature accounts are no longer feasible.

Inclearings & Automation. Unlike over-the-counter checks, which are deposited at the same bank they are drawn against, "inclearing" checks are deposited at other financial institutions and processed by those institutions through a clearing house such as the Federal Reserve before returning the check to the bank of origin. Once checks enter the system, they are scanned and processed in bulk using high-speed automation instead of being processed one check at a time by a live person. It saves banks time and money and speeds the transfer of money. It also means banks can no longer compare checks against signature cards."

I do not see how this can be a requirement for LMSCs, since banks do not do anything to check the signatures anyway. In my opinion the requirement should be dropped from the minimum standards.