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Association Account Headaches

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Question: 
We have a Fire Department Association account that is causing tremendous headaches. I need some advice. The fire chief and assistant chief who set up the account have recently resigned from the volunteer department and the city has appointed new members. As the new accounts representative for the bank, I received a letter from the city, signed by city council members requesting the removal of the previous chief and assistant and for the new ones to be added. My problem is that the previous assistant chief is now claiming that the city had no authority over the funds and should never have had the original names removed from the account. My stand is that the monies belong to the association and since he or she resigned from the fire department, he or she has no more claim to the funds than an average citizen. Can you shed some light on this for us? We are also seeking advice from our legal counsel since this is such an ongoing issue in this small town that it will most likely result in legal action.
Answer: 

If the association is an arm of the city council, the city council might have control over who signs on the account. However, my gut tells me that the Fire Department Association is probably not an arm of city government. It's more likely a fraternal or labor organization with its own separate existence. You are right to consult with legal counsel on this question. You have parties sparring over access to funds and you want to get the bank out of the middle. Your legal counsel, after studying the situation, should draft correspondence to the affected parties (city counsel, the association and the two former officials) setting forth the bank's stance. If that doesn't resolve matters, your counsel will probably suggest that you ask the courts to determine who controls the funds.

First published on BankersOnline.com 4/21/08

First published on 04/21/2008

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