Reimbursement to Directors

I just received the HOA's July and August financials and have a question
We are a California located HOA

In the July financials there was a remimbursement to the Association President for over $1000 with no indication what the reimbursement was for.

The same financials where missing the Allocated Reserve Fund Schedule Report

In the August financials there was a reimbursement to the Assocation Secretary for $680 and it was labled "plants"

The Association Board of Director's have not had ANY meetings this year that were open to the public and if they did have any meetings it was kept under the table.

Questions

1) Can the Assocation reimburse directors in these amounts without first approving the expenditures in an open meeting.

If you reply they cannot what are you basing the reply on?

Thanks

David, in California all Board meetings except for executive sessions are required to be open to the homeowners and to have a agenda for the meeting posted at least four days prior to the meeting, except for an emergency meeting. You can also request notification by mail. You also have the right to inspect the records pertaining to these reimbursements and can request copies of the minutes where they might have been discussed.

Civil Code §1363.05. Open Meeting Act
(f) Unless the time and place of meeting is fixed by the bylaws, or unless the bylaws provide for a longer period of notice, members shall be given notice of the time and place of a meeting as defined in subdivision (j), except for an emergency meeting, at least four days prior to the meeting. Notice shall be given by posting the notice in a prominent place or places within the common area and by mail to any owner who had requested notification of board meetings by mail, at the address requested by the owner. Notice may also be given, by mail or delivery of the notice to each unit in the development or by newsletter or similar means of communication. The notice shall contain the agenda for the meeting.

(g) An emergency meeting of the board may be called by the president of the association, or by any two members of the governing body other than the president, if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice as required by this section.

David,

I doubt you will find the answer to your question in the D-S statutes or in your gov. docs. A board member may be reimb for out-of-pocket expenses associated with assn business. If the sec bought plants for the assn she is entitled to be reimb for them. It should be stated somewhere in the Treas' records what the reimb to the Pres was for; not necessarily stated on the financial statement. These reimb's may have been approved verbally or thru email communications. I think I would be more concerned that the board is not noticing their meetings. CA is an open meeting state and, as a member, you are entitled to notice of all board meetings.

Just wondering why you employ a mgmt co with only 8 units. Seems like the board should be able to conduct the business of the assn quite easily w/o going the exp of a mgmt co.

David,

I didn't say that was the proper way to handle reimb a board member. But, perhaps that is the way your board handled it. When I was treas of my former assn I had out-of-pocket expenses from time to time. I always had receipts for the expenditures and would bring it b/4 the board for approval b/4 writing myself a check. The same applied if any other board members had out-of-pocket expenditures. In fact I started a petty cash fund (only $50) to handle these expenses but the board was always appraised of the expenditures and the petty cash fund was accounted for on our monthly financials. Yes, there is a right way and a wrong way of doing things; not all boards do it the right way all the time. How your board is handling these out-of-pocket expenditures may not be illegal but it sure does raise questions. I would think twice about suing on this issue but you certainly have a claim of violating state law by not noticing board meetings. So, if you want to spend $$$ on a lawsuit I would suggest it be about that violation. Oh, and the Board's D&O ins may NOT pay their court costs if it can be proven that they knew about the open meeting law but violated it anyhow. And what about this manager -- isn't he/she aware of the state laws?

MaryA1 - excellent response but I question reimbursable expenditures in these amounts. I agree may not have much legal footing about the reimbursements but absolutely have about the noticing of minutes. I sued the HOA in June 2010 over this same issue and it was settled in a court case in August. The Board nor its court representative informed me about the July/August (beginning of versus case was later) expenditures and that the Board met and approved them or I would not have settled the case in the manner I did.

SteveM9 - Steve if they were budgeted for them they would have been put the expenditures into those budget line items on the monthly financial report versus reporting them as seperate line items and indicating reimbursable expense. Example we have an approved budget line for gardener but no approved budget line for plants or landscaping. Thus, both expenses were off approved budget line items for the fiscal year. The problem here is there was no meeting approving the expenditures and no meeting approving the reimbursement. Additionally, it looks like something for the President is being covered-up on this expense such as reimbursing him for repairs to his property as they are not replying and they didn't list reason for expenditure whereas for the VP they showed it was for plants.

You think simple question: I asked it 5 business days ago along with asking for the meeting minutes of the meeting that "was" conducted to approve expenditures and meeting that approved reimbursement. I have not received any reply from the Management company nor the HOA.

MaryA1: You ask about the Manager and are they aware of the laws. Well to give you an example prior to the lawsuit I indicated above I sent an e-mail to the Assocation Management Company person and indicated that the HOA was in violation of 7 different laws governing them. One of them being not conducting meeting minutes as required by our CC&R's and another one was the illegal transfer of money from the reserve fund. I got back an e-mail from her indicating "MIND YOUR OWN BUSINESS and stop telling us how to run our business." In the lawsuit I didn't get to present the this e-mail as the HOA agreed to settlement which I foolishly agreed too.
The good thing this time around is the HOA Board was aware of the requirements to have a meeting in both the July/August timeframe because of my pending lawsuit indicating this requirement but they still proceeded to do stuff outside the laws govering them.

Right now they are not in compliance with the Court mediated settlement for repairs to my property and other issues from the mediated settlement. I have to wait another couple weeks until a specific dates passes and then I can reopen the suit for non-compliance.

The bottom line is our HOA Board thinks it can operate out outside of laws governing it. The Management company will not keep them in line by informing them that they are outside of complaince. They know its extremely expensive for me to get a lawyer to sue them and my only option is small claims court.

David,

I too would question these expenditures; let the treas point out the line item on the financial statement that they apply to.

You know our answers are always based on what the state law says or what your gov docs say. However, there are some errant boards out there who don't care about the gov docs and/or state law. Sounds like you board may be in this category. If the majority of the members in the assn don't care then it's up to you to take them to court or just let it go. Depending upon the violation, you may want to just let it go. IMO,it's not worth the time, money and trouble especially if the majority of the members don't care.

Heh, thats not shady or theft. Everyone pays for things on credit card. If he uses a rewards program or not has nothing to do with the HOA.

The only thing that matters is, did he pay for something?
Was it approved?
Should he be reimbursed?
Done.

David,

Since there have been no board meetings noticed to the members, that, in itself, is a violation of state law. Whether the board is aware of this or not is not known. But, since there is a mgmt co I would think they should know; therefore it may be fair to assume the BOD doesn't care about state law. So, it could be that they are "meeting" in secret, by email or telephone (all violations of state law) and these reimb's have been approved. The reimbursements would not show on the financial statement as a reimbursement but what was reimbursed should be shown in the appropriate account(s) as an expense. There is no way you could detect whether the reimb's are being handled correctly w/o knowing what they were for. Since meetings are not being announced you won't be able to ask these questions at a meeting. If the manager fails to answer your email I would email the board Pres and copy all the board members. Without issuing any ultamatims or making any accusations; just send a friendly inquiry about these reimb's -- try not to put them on the defense. If you still get no answer then it may be time to take more drastic steps by contacting your friends and neighbors and let them know of your concerns. Then you will have a group of concerned members to confront the board.

David ... You may want to check your state statutes: http://www.associationtimes.com/stateInformation.htm

You should also be allowed to review or given copies of any receipts that you request. Most HOA's are non-profit corporations and certain accounting practices should be followed for non-profit. There should be a detailed receipt available showing any and all items purchased.

Great site I have used it extensively over the past year. Unfortunately, I can't find any DS or case law that covers me on this issue other than the issue about not conducting meetings.

I formally requested to see the detailed receipts and I'll keep you all informed. I appreciate all your help in allowing a HOA homeowner work through the problems. I'm again running for next years HOA Board so hopefully can clean-up some of this nonsense.

MaryA1 - thanks

re: Next board meeting etc... In early June I filed a Small Claims suit against the HOA which was held in August. Claims I was making, there was 7 violations of the law I was claiming, was the issue of no board meetings, conducting illegal meetings etc... During the case they agreed to settle. Part of the settlement was full painting/repairs to exterior of my property within 60 days, to change CC&R regarding HOA Board Meeting that they had to be held at least 3 times a year with no more than 4 months apart and a $500 fine to each Board member if not held within the time frame, change to CC&R with vote regarding rentals as we are at 4 out of 8 units rented, and some other agreements all by December 31st, 2010. In return I would not force a Board meeting for remainder of year except for annual meeting.

11 days after above case Board President put his home up for short-sale - timing very interesting giving he personally negotiated without other Board members input on the agreed settlement. That is a whole other issue.

At the time I agreed to the settlement but was not aware of all the going on in July/Early August before court meeting or I would not have agreed to settle and pushed the lawsuit as I was very much winnning before Court ordered recess for lunch and the time they agreed to settle.

Well now I'm fighting them on the work being done on my property as its not being completed. They have about 2.5 weeks more before the 60 day deadline or I will refile and include all the shenagins going on now like the meeting they had to have to approve the expenditures I'm noting in this thread.

Sorry for long explanation but you asked. Smile