Clara, there is no specific prohibition against using a centralized disbursement account.  People do it all of the time. However, there is a restriction against using on single cash account for each project.  The standard is that each project maintains a bank account. They deposit money into that account. The management company then writes checks from a central account. This account is reimbursed from each project account. All of that is allowable. However, using only one bank account for all projects requires HUD approval and very few people get the approval today. Each project must have its own security deposit account also. 

Now this requirement does not come from a Handbook. It comes from the Reg Agreement. Here is the language.

11.PROPERTY AND OPERATION; ENCUMBRANCES.

a. Borrower shall deposit all Rents and other receipts of the Project in connection with the financing of the Project, including equity or capital contributions required under the Firm Commitment or otherwise advanced for the purpose and as part of the Mortgaged Property, in the name of the Project in a federally insured depository or depositories and in accordance with Program Obligations. (Such required equity or capital contributions shall not include certain syndication proceeds, such as proceeds from Low Income Housing Tax Credit transactions used to repay bridge loans, all as more fully set forth in Program Obligations.) Such funds shall be withdrawn only in accordance with the provisions of this Agreement for Reasonable Operating Expenses of the Project or for Distribution of Surplus Cash or as reimbursement of advances as permitted by Sections 14 and 15 below; or for permitted deposits authorized by this Agreement or for any other reason authorized under this Agreement. Any person or entity receiving Mortgaged Property other than for payment of Reasonable Operating Expenses, authorized Distributions of Surplus Cash, or for any reason authorized under Section 34 of this Agreement, shall immediately deliver such Mortgaged Property to the Project and failing so to do shall hold such Mortgaged Property in trust.

This has been the case for as long as they have been doing mortgages. Now Handbook 4370.2 did make some provision for the potential relaxation of this rule by issuing the following:

2-6. REGULAR OPERATING ACCOUNT

A. The Regular Operating account is a general operating account for the project which is used for depositing rental receipts and other receivables not specifically designated for the Security Deposits Account. The account also is used to pay operating expenses of general administration including mortgage payments, management fees, utilities and maintenance. The Regulatory Agreement states that the funds must be maintained in a separate account. However, this paragraph suspends the operation and effect of this Regulatory Agreement provision by authorizing the management agent to hold funds in a centralized account, up to or exceeding $100,000, in institutions under the control of, and whose deposits are insured by, the Federal Deposit Insurance Corporation, National Credit Union Association, or other U. S. government insurance corporations under the following conditions:

* 1. Managing agents must determine that the financial institution has a rating consistent at all times with current minimally acceptable ratings as established and published by Government National Mortgage Association (GNMA).

* 2. The managing agent must monitor the institution’s ratings no less than on a quarterly basis, and change institutions when necessary. The managing agent must document the ratings of the institution where t.he funds are deposited and maintain the documentation in the administrative record for three years, including the current year.

* 3. In the event that the managing agent fails to follow these procedures and the bank fails, the owner/managing agent will be expected to make up losses sustained by the various project accounts held by the failed bank.

* 4. Deposits to and disbursements from the centralized account must clearly be traceable to each project. The actual cash position of each and every project in the centralized account must be easily identifiable at all times without exception.

* 5. The managing agent must allow a project owner to require, at any time, that the particular owner’s funds be kept isolated and separate from the funds of other projects held by the agent; that is, at all times an owner is to have the prerogative of not participating in the centralized account arrangement or of withdrawing from such an arrangement.

NOTE: The above language is not deemed a modification of the Regulatory Agreement. Therefore, HUD reserves the right to invoke this Regulatory Agreement provision and make it operational in the future through notice or handbook change, if it is determined that such a policy is necessary or desirable.

For the last 10-15 years, HUD has not allowed projects to implement that change. To do it, you must have HUD approval and we do not see it granted very often, if every.