Bookkeeping requirements

Started by MiloK • 15 replies • 3031 views

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MiloK (California)
Posts: 12

Posted:

Hello,

I just recently become treasurer of a small HOA consists of 20 units. We are self-managed and all board member are volunteers. Our president (a retiree who has all the time in the world) also serves as a handyman and he performs various small repair/maintenance tasks. Most are very thankful for his contributions to the community. He sends itemized invoices to the HOA periodically for the work he performed.

I am not an account nor bookkeeper, but technically speaking an invoice is short of a receipt and can be used for bookkeeping purposes. If the specific invoice has a signed contract behind it, then it's a legitimate receipt.

My question is: "Do the HOA need to ask the vendor (in this case our president) for receipts on the material part of the invoice?"

Most of these repair/maintenance tasks are small tasks which costs anywhere between $50 to less than $1,000. The numbers on the invoices are reasonable amounts, but it adds up. Since I am serving everyone's interest in our community, I want to make sure the proper procedures are followed.

Thanks
Milo

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Quote:

Posted By MiloK on 07/29/2008 1:53 AM
Hello,

I just recently become treasurer of a small HOA consists of 20 units. We are self-managed and all board member are volunteers. Our president (a retiree who has all the time in the world) also serves as a handyman and he performs various small repair/maintenance tasks. Most are very thankful for his contributions to the community. He sends itemized invoices to the HOA periodically for the work he performed.

I am not an account nor bookkeeper, but technically speaking an invoice is short of a receipt and can be used for bookkeeping purposes. If the specific invoice has a signed contract behind it, then it's a legitimate receipt.

My question is: "Do the HOA need to ask the vendor (in this case our president) for receipts on the material part of the invoice?"

Most of these repair/maintenance tasks are small tasks which costs anywhere between $50 to less than $1,000. The numbers on the invoices are reasonable amounts, but it adds up. Since I am serving everyone's interest in our community, I want to make sure the proper procedures are followed.

Thanks
Milo

Milo,

This is a bad practice. I would strongly counsel you against continuing it.

While there is technically nothing incorrect about contracting with or paying an association board member to provide handyman services, it creates the appearance of self-dealing. It removes the ability of the board to deal in arms length transactions for the best interest of the association.

The situation is probably entirely on the up and up. But,
I think it is not only appropriate, but mandatory, that invoices be accompanied by receipts for full and complete documentation.

Otherwise the board is opening itself up to accusations of malfeasance or misfeasance.

I gotta ask the question: who on the board is authorized to sign the checks? If the President has such authorization along with the Treasurer (which is not uncommon), then you have a serious issue that needs to be dealt with immediately.

I hope my thoughts help. Let's see what others have to say as well. There is good information here.

SusanW1 (Michigan)
Posts: 5,202

Posted:

This is one of those circumstances where an activity has been going on, or is allowed to go on until someone speaks up. Then the boat gets rocked.

Two choices: 1) don't rock the boat since he is your handyman and one would have to be hired anyway - probably at a much higher rate 2) require that all jobs go out to bid and wait until you can get response from other handymen.

In ANY case, receipts MUST be submitted and reimbursement check written. Any good auditor or bookkeeper would want to see receipts for checks written to any individual, much less the president!! ALL jobs should also be signed off by another board member to witness that they truely have been done.

In 5, or even 20 years what will it look like that so many checks are written to an officer with NO backup info in the records?

PS Is your Board requiring hired help to provide worker's comp and/or business insurance from anyone who does work around the complex? What if he gets hurt on a ladder?

MiloK (California)
Posts: 12

Posted:

George,

Thanks for the advice! No one wants to do the job and the new board members pretty much got recruited (new homeowners in the community). The HOA did follow proper procedures to cast votes and the proper responses were received.

I agreed this creates the appearance of self-dealing. But, as long as we keep records straight and provide proper documentation for every transaction, I think we are ok. Most people in our community are very thankful for his contributions not only for the handyman tasks but also for keeping an eye on the community (illegal tresspassers, busted sprinkers, etc...) Also, everyone in the neighborhood pretty much goes to him when things need to be fix.

Yes, you are right. The president and the treasure co-signs all the checks. Turns out he does have receits. So I request to have a copy of all receipts for record keeping and mainly the protection of the HOA if an audit is deemed necessary.

Thanks
Milo

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Quote:

Posted By MiloK on 07/29/2008 1:51 PM
George,

Thanks for the advice! No one wants to do the job and the new board members pretty much got recruited (new homeowners in the community). The HOA did follow proper procedures to cast votes and the proper responses were received.

I agreed this creates the appearance of self-dealing. But, as long as we keep records straight and provide proper documentation for every transaction, I think we are ok. Most people in our community are very thankful for his contributions not only for the handyman tasks but also for keeping an eye on the community (illegal tresspassers, busted sprinkers, etc...) Also, everyone in the neighborhood pretty much goes to him when things need to be fix.

Yes, you are right. The president and the treasure co-signs all the checks. Turns out he does have receits. So I request to have a copy of all receipts for record keeping and mainly the protection of the HOA if an audit is deemed necessary.

Thanks
Milo

It sounds as if you have everything under control, and you know what you are doing.

That makes me feel good. I am glad.

MiloK (California)
Posts: 12

Posted:

Hi Susan,

Yes, I don't want to rock the boat but things have to done properly. Yes, he charges a lot less than outside resources. I spoke to him and he does keep receipts but now he will provide a copy to the treasurer not just himeself.

Regarding workman's comp... I have the same concern and have spoken to an insurance agent. The answer was "since we are non-profit organization, we are not allow to have a payroll. Workman's comp is only application if you have a payroll.

I have also check the CA state board of contractors, contractor licenses are required for major jobs such as roof repair, large landscaping jobs, painting. Handyman licenses are issued by a city where they operate their business. Most cities issues such licenses for the purpose of tracking revenue(so they can collect more taxes). As for requirements on workman's comp the cities don't care. I have called 3 or 4 cities and they all said the same thing.

Thanks
Milo

SusanW1 (Michigan)
Posts: 5,202

Posted:

You need to talk to an ACCOUNTANT about this, not an insurance agent. There are errors in what you have been told.

By the way, insist that your paid/volunteer mentor someone as he performs these jobs. If he dies or moves away, he could take a lot of knoweldge with him. That's what happened with our very unique well water system that services 250 homes!

The "volunteer" retired and moved away. He had done all the maintneance so long that no one could find anything or knew what to do.

Kind of like when grandma dies and takes all the recipes that were in her head with her. Create a maintenance committee and get some more people trained for these tasks.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Susan is right. You are not getting the correct information. Being not-for-profit has nothing to do with payroll.

There is a lot of good advice out there from people who are willing to help at no charge. And there are some great resources in the library and on the web as well.

NancyL4 (California)
Posts: 60

Posted:

If you are paying him more than $600 in a year for his services, you should be sending him a 1099 (IRS requirement). Also, there are CA state requirements. I don't know how much you are paying him for his labor.

KirkW1 (Texas)
Posts: 1,665

Posted:

Gven what yo have said, I would not rock the boat and try to rid the president of doing handyman stuff. It probably gives him a great sense of being needed and identity while saving the HOA a bunch of money. But I would insist that a motion be put on the table at each annual meeting to keep the situation going. This is to protect you (and other BOD members).

If he is saving the association money most people will want him to continue. And your steps will help ensure he remains the honest man he probably is. It would be good for him to provide a copy of the store receipts for all materials. If there is a markup (not unheard of) then it should be documented as to what the markup is.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Either he submits the receipts for material costs and does the labor free

or

he submits a bid for the entire job and the board moves to approve that. (his labor is included in the bid)

In any case, a paper trail MUST be provided. Undocumented checks written out to an indivudual is a RED FLAG to an auditor or audit review.

P.S. I hope that all his "jobs" are being approved by the Board also BEFORE he starts. He is just not doing things around the complex as HE determines them, is he? He needs to submit a list of "to do" things, and the Board should approve them.

I know it is difficult to be more disciplined than it is to relax the rules, but you MUST consider the future and how you are ever going to replace this really "extraordinary" worker. It's not going to last forever and your Board needs to act a little more professional about the work done around the complex in terms of directing the jobs and the payment procedure.

MiloK (California)
Posts: 12

Posted:

Quote:

Posted By KirkW1 on 07/29/2008 9:59 PM
Gven what yo have said, I would not rock the boat and try to rid the president of doing handyman stuff. It probably gives him a great sense of being needed and identity while saving the HOA a bunch of money. But I would insist that a motion be put on the table at each annual meeting to keep the situation going. This is to protect you (and other BOD members).

If he is saving the association money most people will want him to continue. And your steps will help ensure he remains the honest man he probably is. It would be good for him to provide a copy of the store receipts for all materials. If there is a markup (not unheard of) then it should be documented as to what the markup is.

The HOA/community is his child. When I ask for receipts he was able to provide all photo copies within 30 minutes. Everything matches down to the penny and no-markup!

I think this situation boils down to "old fart accounting"... everything on paper. Now that we have more new members on the board, we are running most of our communication on email (in addition to face to face and phone). Personally, I love the email system as everything is traceable in writing.

MiloK (California)
Posts: 12

Posted:

Quote:

Posted By SusanW1 on 07/30/2008 6:18 AM
Either he submits the receipts for material costs and does the labor free

or

he submits a bid for the entire job and the board moves to approve that. (his labor is included in the bid)

In any case, a paper trail MUST be provided. Undocumented checks written out to an indivudual is a RED FLAG to an auditor or audit review.

P.S. I hope that all his "jobs" are being approved by the Board also BEFORE he starts. He is just not doing things around the complex as HE determines them, is he? He needs to submit a list of "to do" things, and the Board should approve them.

I know it is difficult to be more disciplined than it is to relax the rules, but you MUST consider the future and how you are ever going to replace this really "extraordinary" worker. It's not going to last forever and your Board needs to act a little more professional about the work done around the complex in terms of directing the jobs and the payment procedure.

Yes, he does paper receipts for everything. All checks written are accompanied with either invoices or receipts. Now that we get receipts on all handyman activities, we are in good shape.

Yes, all his jobs are approved by other board members excluding himself.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

Milo,

You are extremely fortunate to have such a dedicated homeowner. I would bend over backwards to make his efforts as clutter-free as possible. Sounds like you have the situation resolved. Good for you and him.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Milo - I am just cautioning your Board to make sure that the budget still reflects the TRUE cost of maintenance. You are blessed to have this fellow doing for very little cost (just for parts) but you must not rely on him forever.

Suppose he has serviced and repaired the pool for years, at a cost of $200. Then he moves or can't do it anymore and your Board finds out that the cost of servicing by any company is realistically around the $1,000 mark.

I am just trying to prevent what happened in our sub when we had a lot of people run the water department "for free" - and when they moved or died, we got real sticker shock when trying to get professional service for our water system. No one ever got a going rate for all the free service we had gotten over the years.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

I am afraid I would have to discuss all this in an open owners meeting and if necessary pass a motion to approve or disapprove of this practice. Make sure all the owners are informed of the coditions and who is bossing who and who accounts to who and how. Set the conditions with a mandatory review every six months by a selected few members of the association and file a report every six months. This is bad practice, but it you can make it work, more power to you.

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