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JanetB9


Posts:62


04/23/2021 5:27 AM  
We discovered the MC was paying for holiday dinners using HOA funds. The legal team said this is normal but it doesn’t seem right to me. Is this legal? I don’t see it anywhere in the minutes but the MC accountant said it’s normal occurrence. She was question because our previous PM who was fired by the MC showed the invoices to a homeowner for those dinners.
TimB4
(Virginia)

Posts:17599


04/23/2021 5:42 AM  
I agree with you, something doesn't pass the smell test.


That said, they could have been business dinners.
However, if I were on the board, I would question it and prohibit future use of funds in that way. If it was done again, I would terminate the contract.

Asking an employee of the company you think is misusing funds will not always get a correct answer.


If you have an MC licensing department in your State, I would pose the question to them.
I would also pose the question to a different CPA.

SheliaH
(Indiana)

Posts:3923


04/23/2021 6:00 AM  
When I was on the board, we did one or two holiday dinners (I didn't attend because I was usually out of town at the time), but I believe everyone paid for their own meals. I agree this should be reflected in the minutes, meaning there was a motion and a vote to approve the expense. Was these dinners for the board members? If so, did you ask the BOARD about this?

There are two ways to look at the idea of a holiday dinner. One is that this is a show of appreciation for the work the board put in through the year - as long as this isn't a junket at, say, Ruth Chris, I'd be ok with it. I don't see people clamoring to be on the board because they'll get a free dinner at the end of the year.

The other way is that even this could lead to other questionable expenses that only benefit the board, and that could be the start of a domino effect where the board members get all the perks, which is inappropriate because HOA resources should be used to benefit the ENTIRE community, not just a few people.

I'm a little disturbed at the previous property manager's action - if you're going to show these invoices to one homeowner, why not do that for the ENTIRE community? After all, they're the ones who elect and re-elect the board members. If you are the homeowner, why didn't YOU go to the BOARD with your questions? Was this a first-time thing? Were these dinners for the board? The property manager works at the board's direction, so this had to be authorized by them and I would expect to see this expenditure reflected in board meeting minutes with a motion and vote for the same.

BarbaraT1
(Texas)

Posts:415


04/23/2021 6:20 AM  
There isn’t going to be a law that says “you can’t spend HOA funds on a dinner.”

If the board of directors approved the expense, the manager isnt going to refuse to pay it.

Sounds to me like a homeowner requested documents they are entitled to, the former manager provided them, and got fired for doing the right thing. Go to your board of directors and ask if they approved this expense, and why telling a member how their dues are spent is a fireable offense.
AugustinD


Posts:313


04/23/2021 7:32 AM  
Posted By BarbaraT1 on 04/23/2021 6:20 AM
There isn’t going to be a law that says “you can’t spend HOA funds on a dinner.”
There is extensive case law on the subject of the enforceability of covenants as contractual terms. If the covenants limit how HOA funds may be spent, then not spending outside those limits may be enforced in the courts.
AugustinD


Posts:313


04/23/2021 7:36 AM  
Posted By SheliaH on 04/23/2021 6:00 AM
There are two ways to look at the idea of a holiday dinner. One is that this is a show of appreciation for the work the board put in through the year
No compensation clauses (for directors) in covenants mean no compensation for directors. I think getting Boards to read and follow their covenants is important. Give some directors an inch regarding compensation, and they might take a mile.
BarbaraT1
(Texas)

Posts:415


04/23/2021 7:54 AM  
Posted By AugustinD on 04/23/2021 7:32 AM
Posted By BarbaraT1 on 04/23/2021 6:20 AM
There isn’t going to be a law that says “you can’t spend HOA funds on a dinner.”
There is extensive case law on the subject of the enforceability of covenants as contractual terms. If the covenants limit how HOA funds may be spent, then not spending outside those limits may be enforced in the courts.




I acknowledge that you are the expert on every single aspect of every single HOA in the country, and none of us should even bother posting because you, and only you, always have the right answer, but what the OP originally posted was "is this illegal" and there is nothing factually incorrect about my response.
AugustinD


Posts:313


04/23/2021 8:09 AM  
Posted By BarbaraT1 on 04/23/2021 7:54 AM
there is nothing factually incorrect about my response.
Case law is clear that actions violating reasonable covenants are unlawful/illegal. Your response is factually incorrect. Your response misleads people into thinking, "Well, if the covenants don't prohibit xyz, then the Board can lawfully do xyz."

You and I disagree.
KerryL1
(California)

Posts:8018


04/23/2021 10:23 AM  
Say, Janet, who was treated to this holiday dinner? How many? Or are there more than one holiday dinners a year? Who signed the check to pay for this expense?
MaxB4
(Maine)

Posts:214


04/23/2021 10:28 AM  
Actually, who were at these holiday dinners that the MC was paying for using HOA funds. Was it the actual directors of the HOA whose funds were being used?
AugustinD


Posts:313


04/23/2021 10:40 AM  
Posted By JanetB9 on 04/23/2021 5:27 AM
The legal team said this is [snip]
The legal team? *&^%$ Who is this? The attorney representing the management company? Who is "the legal team's" client? I can just about guarantee it is not a team. I can just about guarantee that if the MC is playing "the legal team" card that the MC is full of know-nothing nonsense.
BarbaraT1
(Texas)

Posts:415


04/23/2021 11:20 AM  
Posted By AugustinD on 04/23/2021 8:09 AM
Posted By BarbaraT1 on 04/23/2021 7:54 AM
there is nothing factually incorrect about my response.
Case law is clear that actions violating reasonable covenants are unlawful/illegal. Your response is factually incorrect. Your response misleads people into thinking, "Well, if the covenants don't prohibit xyz, then the Board can lawfully do xyz."

You and I disagree.




No, I'm trying to explain to this OP - and all the other people who post here asking if their highly specific situation is illegal - that every conceivable scenario isn't exhaustively listed in state statute. So the answer to the question of Is This Very Specific Thing My HOA Did Illegal? is seldom yes or no. It might be "you're not going to find a specific law to suit your situation, you may have to research and extrapolate."

JanetB9


Posts:62


04/23/2021 11:41 AM  
The dinners where over a period of 6 years receipts totaling $6,500. Nothing is in the minutes regarding these expenses. The MC paid this money to a vendor but the accountant said the Board approved. Checked our documents and it clearly states what assessment fees can be used for and it doesn’t mention dinners. How do we go about addressing this to see what occurred? We are in central California.
MaxB4
(Maine)

Posts:214


04/23/2021 11:47 AM  
Posted By JanetB9 on 04/23/2021 11:41 AM
The dinners where over a period of 6 years receipts totaling $6,500. Nothing is in the minutes regarding these expenses. The MC paid this money to a vendor but the accountant said the Board approved. Checked our documents and it clearly states what assessment fees can be used for and it doesn’t mention dinners. How do we go about addressing this to see what occurred? We are in central California.



Who were the dinners for, The directors or the management company?
SheliaH
(Indiana)

Posts:3923


04/23/2021 12:15 PM  
Uh,augustin, you did read the next paragraph, didn't you? I said this sort of thing could lead to abuse.

I get what you're saying - a dinner paid with HOA funds could get the side eye, even if it's once a year because some people won't stop with that. That said I know some codes of conduct that allow for small tokens, such as a coffee cup or things that don't exceed, say, $15.

(oh wait, no one seems to like these for HOA boards).

We always talk about the difficulty of finding board members and since they cant get a break on assessments (which they shouldn't) I dont see a problem with a year end get together.

PROVIDED the homeowners are aware of it and approve the expense it's noted in the annual budget, only happens once a year and the cost of the dinner before taxes and tip doesn't exceed a certain dollar amount. That doesn't appear to be the case in this community and the board should explain themselves.
JohnC46
(South Carolina)

Posts:10952


04/23/2021 12:32 PM  
An argument can be made that any expenses outside an associations operating expense is improper. I get that. An argument can be made that some small expenses outside an associations operating expense can be warranted. I get that.

That said, over $1K per year on dinners is pushing the envelope. I would want to know for who and who authorized such. I assume the BOD told the MC to pay it. If not, I would be having a Come to Jesus meeting with the MC.
LetA
(Nevada)

Posts:1163


04/23/2021 12:37 PM  
Posted By MaxB4 on 04/23/2021 11:47 AM
Posted By JanetB9 on 04/23/2021 11:41 AM
The dinners where over a period of 6 years receipts totaling $6,500. Nothing is in the minutes regarding these expenses. The MC paid this money to a vendor but the accountant said the Board approved. Checked our documents and it clearly states what assessment fees can be used for and it doesn’t mention dinners. How do we go about addressing this to see what occurred? We are in central California.



Who were the dinners for, The directors or the management company?




Sounds like a back door Mickey Mouse way to get the HOA to pay for these junkets. MC has the Dinners , then bills the HOA for "X" expenses.
KerryL1
(California)

Posts:8018


04/23/2021 1:44 PM  
I'll try again, Janet: Who were the non-paying guests at these dinners? Directors? HOA staffers? MC staff? homeowners? WHO?

Check Board meeting minutes to see of the Board approved these expenditures. How would an accountant know if the expenses were approved?? Who does this accountant work for?

I, too, doubt that a "legal team" did anything. What does "legal team" mean? Whose legal team?

Are you on the Board, Janet?
MelissaP1
(Alabama)

Posts:10131


04/23/2021 1:46 PM  
This is one of those MC/HOA grey areas that crosses lines. You have to keep in mind the MC is a paid by te HOA to handle the HOA's business/accounting. They don't actually to make HOA financial decisions but do what the HOA tells them to do. A check should not be cut unless signed off by the HOA board.

The holiday dinners if were given by the MC should have used their own company funds to pay for it. Nothing wrong for the MC to "buy dinner" with their own money. Most likely not going to happen but if it does, then okay. However, the MC organizing a holiday dinner/event on the HOA's dime... Different story. The HOA has to agree that it is a social event they are willing to pay for and the MC to cut the check for.

So does your HOA have a "social" budget? Then this may be allowable. If not, then I would explain the relationship should be and not be.

Former HOA President
AugustinD


Posts:313


04/23/2021 2:01 PM  
Posted By KerryL1 on 04/23/2021 1:44 PM
Who were the non-paying guests at these dinners? Directors? HOA staffers? MC staff? homeowners? WHO?
Ditto.
CathyA3
(Ohio)

Posts:1888


04/23/2021 2:12 PM  
I agree with others that this smells. The fact that there seems to be an effort to hide the expense suggest that the folks involved know it's shady - if it were truly OK, the info would be made available.

If board members were being treated to dinners at the HOA's expense, they're compensating themselves which is often prohibited by the bylaws. And the manager shouldn't be treating them to dinner, either - this looks like a quid pro quo, and our previous manager would have gotten fired by her employer even if she'd used her own money.

If I were in that community, I'd be talking to neighbors about throwing out the bums and electing honest board members.


MaxB4
(Maine)

Posts:214


04/23/2021 2:22 PM  
Posted By CathyA3 on 04/23/2021 2:12 PM
I agree with others that this smells. The fact that there seems to be an effort to hide the expense suggest that the folks involved know it's shady - if it were truly OK, the info would be made available.

If board members were being treated to dinners at the HOA's expense, they're compensating themselves which is often prohibited by the bylaws. And the manager shouldn't be treating them to dinner, either - this looks like a quid pro quo, and our previous manager would have gotten fired by her employer even if she'd used her own money.

If I were in that community, I'd be talking to neighbors about throwing out the bums and electing honest board members.





WOW
BarbaraT1
(Texas)

Posts:415


04/23/2021 2:24 PM  
I’m never one to jump to CORRUPTION! so I think there’s still a lot more information that’s needed.

Who the dinners were for, what GL they were coded to, is there a line item in the budget for events, what prompted the original request to see the invoices...I do wish posters would tell the whole story instead of asking cryptic questions.
MaxB4
(Maine)

Posts:214


04/23/2021 2:34 PM  
Would someone like to try and explain what the actual facts are?

I have heard nothing concrete. Who the dinner were for has not been explained. Unless clarified, I ma assuming, based on the dollar amount, they were for the whole community.

I also would like the expert to cite case law saying this is illegal, whatever you think happened.
AugustinD


Posts:313


04/23/2021 2:42 PM  
At this point, I am still tripping over the phrase "legal team" used by the manager (and what a sorry manager I bet this person is).

JanetB9 posted recently about a California HOA. Maybe this is the best news for this thread I have seen so far. The California statute for HOAs gives her more options, to address possible wrongdoing, than most any other state.
AugustinD


Posts:313


04/23/2021 2:56 PM  
Posted By JanetB9 on 04/23/2021 11:41 AM
The dinners where over a period of 6 years receipts totaling $6,500. Nothing is in the minutes regarding these expenses. The MC paid this money to a vendor but the accountant said the Board approved. Checked our documents and it clearly states what assessment fees can be used for and it doesn’t mention dinners. How do we go about addressing this to see what occurred? We are in central California.
In California for what is described, I would start with a letter to the Board asking whether it in fact authorized payments for dinners for _________ (still anyone's guess). In the same letter, ask what part of the covenants permits the Board to spend money for these dinners.

If the Board responds and quotes some vague covenant, report back here with what the covenant says.

If and when the Board fails to respond, proceed to internal dispute resolution as described at https://www.davis-stirling.com/HOME/Internal-Dispute-Resolution. The reason for the IDR request would be something like: To get the Board to agree not to violate the covenant on HOA spending.
MarkM19
(Texas)

Posts:790


04/23/2021 5:47 PM  
My HOA in Ca. had every year a Volunteer Recognition Dinner for both the Person and their partner at a local Restaurant. It happened for years before I was on the board and my 8 years when I served. We had a budget every year of $1500.00 and normally had about 25 attendees. These people were on several committees and volunteered their time over the course of the year. Without good volunteers you end up needing PMs for more duties around the community and that raises expenses much more than the once a year Holiday event. They were always a big hit with our Volunteers. We had Landscaping, Social, Technology and Gate committees. We had 438 SFHs in our HOA.

Since retiring and moving to Texas into a much larger HOA with over 1400 SFHs we have no committees and our board does not think we could get volunteers if we wanted to start them. I disagree but have not felt it is a Hill I want to possibly Die on. Volunteers are a great way to seed future board members.
JanetB9


Posts:62


04/23/2021 11:31 PM  
I’m still trying to get answers. The invoices are paid to a previous painting vendor of the HOA signed by the MC. It just shows attached receipts for dinners and doesn’t say who ate the food. Looked at the minutes there’s no mention of these expenses being approved in any of them. I’m on the Board but only for a short time. The others have been on for about 15-20 years.
MarkM19
(Texas)

Posts:790


04/24/2021 7:26 AM  
Janet,
Okay if that is truly the case then it needs to be called out and the answers. You should never have a receipt that does not match the reason for payment. At this point I would question all of the recent payables. I can't remember if you are on the board or not. If yes I would request a Forensic Audit be done and if anyone voted no to that I would say I want a Role Call vote so that each and every board member would have to defend Why Not.

Board members have a Fiduciary Duty to keep their eyes WIDE open.
AugustinD


Posts:313


04/24/2021 7:51 AM  
Posted By JanetB9 on 04/23/2021 11:31 PM
The invoices are paid to a previous painting vendor of the HOA signed by the MC. It just shows attached receipts for dinners and doesn’t say who ate the food.
Overtime work by the painting vendor, on account of urgency as possibly authorized by the Board? And requiring purchase of food during overtime hours on a number of evenings?

I think the plot has taken a dramatic turn ;)
BarbaraT1
(Texas)

Posts:415


04/24/2021 8:20 AM  
Posted By JanetB9 on 04/23/2021 11:31 PM
I’m still trying to get answers. The invoices are paid to a previous painting vendor of the HOA signed by the MC. It just shows attached receipts for dinners and doesn’t say who ate the food. Looked at the minutes there’s no mention of these expenses being approved in any of them. I’m on the Board but only for a short time. The others have been on for about 15-20 years.





Okay, when you first said “dinners” I thought you were talking about some kind of catered event. Now it sounds like just a bunch of restaurant receipts. And certainly paid to a painter is... odd. I don’t think it really matters at this point who ate the food - I think those of us who were asking were thinking these were volunteer appreciation events or board functions.

Let’s go back to the beginning.

How did these receipts come to light? You said the prior manager was fired for showing them to a homeowner. What’s that story? How did you become aware of them?

Have you asked the other board members to explain what they are for?

All expenses have to be accounted for in a general ledger category. Can you find the corresponding journal entry for this invoice and see how it is categorized.

MaxB4
(Maine)

Posts:214


04/24/2021 9:58 AM  
And the hits just keep on coming.
KerryL1
(California)

Posts:8018


04/24/2021 10:02 AM  
So, Jnet, it's the same painting vendor year after year who gets dinners? Maybe Google that company just to get a quick idea if they're linked with your MC or an individual board member

These "receipts": Are they to restaurants, or what?? . I'd look at disbursements on your financials too. Just look at the last couple of years, I'd say.
MelissaP1
(Alabama)

Posts:10131


04/24/2021 10:25 AM  
Like someone else asked. Are these receipts from actual restaurants? We ask because often times vendors or even members will submit receipts for other things on it. Like if I went shopping at Walmart that day and picked up some paper towels for the clubhouse, I'd submit the whole receipt. I would circle the paper towels. However, someone were to read those receipts they may go "Wow did we pay for groceries???"

So I would need to ASSUME dinner is bought because saw food on a receipt submitted to the HOA? Not really.

Former HOA President
JanetB9


Posts:62


04/27/2021 12:50 AM  
The receipts are for a yearly birthday dinner at fine restaurant. it was paid by the MC to the painting vendor. No Board approval of it. Two Board members said those those birthday parties at restaurant but they thought the vendor treated them to the event. These expenses were paid using HOA funds. There’s could possibly be more. Idk. But for now the total is almost $3,500. Nothing is documented in the minutes to disclose these expenses paid using homeowners money. What should be done about this?
TimB4
(Virginia)

Posts:17599


04/27/2021 1:45 AM  
The Board needs to confront the MC and, at the very least, tell them to stop.

Shame on the board for not actually reviewing the financials every month and asking questions on unknown expenses.


The other opinions/suggestions are still valid.
Knowing the amount really didn't change anything.
AugustinD


Posts:313


04/27/2021 6:06 AM  
Posted By JanetB9 on 04/27/2021 12:50 AM
The receipts are for a yearly birthday dinner at fine restaurant. it was paid by the MC to the painting vendor. No Board approval of it. Two Board members said those those birthday parties at restaurant but they thought the vendor treated them to the event. These expenses were paid using HOA funds. There’s could possibly be more. Idk. But for now the total is almost $3,500. Nothing is documented in the minutes to disclose these expenses paid using homeowners money. What should be done about this?
In my opinion, there are two courses of action: One for a director and one for a member.

-- Possibly in executive session, a director could motion to consult the HOA attorney on these payments; ask the HOA attorney whether they should continue; and ask the HOA attorney whether the HOA should seek reimbursement from the vendor for the last several years of inappropriate billing. There are a few reasons I think this should maybe be done in executive session.

-- A member may immediately wish to request IDR, on the grounds the Declaration is being violated, and seeking an agreement from the Board that it will (1) no longer pay for these dinners and (2) seek reimbursement from the vendor for these dinners.

ND
(PA)

Posts:591


04/27/2021 6:20 AM  
From the OP:
- "holiday dinners" is now "birthday dinners"
- "$6,500" is now "almost $3,500"

It seems like you only have bits and pieces of info and aren't even sure what's factual. You're running down rabbit holes with this limited information and everyone here is assisting with that as well with assumptions and made-up scenarios.

I agree that something doesn't seem quite right.

But I suggest gathering as much data and info as you can, read your HOA docs and state laws, and then ask appropriate questions of those involved/aware to help fill in the blanks. Don't be accusatory at this point, just be investigative. You may even need to seek input from folks/professionals who were not involved (if there are truly some sort of shenanigans going on). From there you can draw conclusions about what was proper/improper and figure out how to move forward.
BarbaraT1
(Texas)

Posts:415


04/27/2021 6:51 AM  
Janet, your story keeps changing and you haven’t answered the questions that have been posed to you.

No one on this forum has a magic solution for you, not are we in a position to fix this for you.

Talk to your other board members and decide amongst yourselves if you want to pursue this. Do what you would do in any scenario if someone who works for you spent your money without your permission and can’t explain what it was for.
JanetB9


Posts:62


04/27/2021 2:07 PM  
The $6500 is not now 3500. It turns out 3500 of the 6500 was birthday dinner for this vendor and the other 3000 were to Board members who had working meetings in which they ordered food which was paid with HOA money. I agree with Augustin, I will discuss with them and see what’s going on. I also think homeowners should know their money was spent in this manner. Thanks for all the input!
MaxB4
(Maine)

Posts:214


04/27/2021 2:21 PM  
Posted By JanetB9 on 04/27/2021 2:07 PM
The $6500 is not now 3500. It turns out 3500 of the 6500 was birthday dinner for this vendor and the other 3000 were to Board members who had working meetings in which they ordered food which was paid with HOA money. I agree with Augustin, I will discuss with them and see what’s going on. I also think homeowners should know their money was spent in this manner. Thanks for all the input!



I've been managing HOA's for 13 years now, and I have seen a lot with a variety of different types of complexes. This is about as strange of occurrence as I have seen, considering it supposedly involves a painting vendor. If you were the one fielding the question, wouldn't you want a more clearer grasp of the facts before asking for advise?
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