Financial Managers Commingling Accounts – Traverse City CPA

Commingling literally means “mixing together” commingling accounts mix together funds belonging to one party with that of another or several others. In many cases this creates conflicts of interest and is illegal but there are a few exceptions. Married couples and business partners can legally commingle accounts, but other circumstances warrant serious consideration. When you comingle accounts there is a loss of identity. Property that was previously deemed separate will now become community property and business partners may have to account to each other. Some financial managers commingle or “pool funds” is to reduce management costs or administration costs. In the case of a customer account being merged with that of a broker’s account or a bank account, it is illegal.

There are steps you can take to assure your accounts don’t end up pooled.

• Be sure the contract you have for your fund management clearly states it is required to distribute in separate accounts.

• Have your certified accountant review your funds about every six months or so and inform you of any discrepancies.

• Review your canceled checks to be sure bank statements and bank reports are from the same accounts. It is not a good sign if you see vendors you have never heard of being paid from your account.

• Beware of a managing agent giving you excuses as to why they cannot provide financial reports. You might hear excuses such as “our system crashed” or “We just hired a new bookkeeper.” These could be indicators of the possible commingling of accounts.

• Be sure you have one or two board members as co-signatories. In the case of commingled accounts this will help you in separating your funds from the others.

Keeping tabs on the activity in your accounts with the help of a quality CPA will allow you to rest assured that your investment funds are where they should be.

To schedule a free evaluation with Harris Group Certified Public Accountants in the Traverse City, Suttons Bay or Petoskey office please call the appropriate number below or fill out the short form, specifying which office you prefer and someone from our firm will be in touch with you soon.

Traverse City Office: 231-946-8930

Petoskey Office: 231-348-6930

Suttons Bay Office: 231-271-9295