Boards Paying Themselves

Started by EbonyJ • 20 replies • 2461 views

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EbonyJ (Tennessee)
Posts: 62

Posted:

Our new board has choose to pay themselves at $25 an hr for any duties outside their board duties. I have served for years w/out any compensation as well as other board members. It is writing in the bylaws and several people are trying to get enough signatures to change the bylaws. Are there any people on the forum that has HOA's that pay themselves? We also have a managment company that we pay.

SusanW1 (Michigan)
Posts: 5,202

Posted:

It depends on what those "other" duties are.

We pay our secretary $600 per year and the treasurer $1500 per year with approved overtime. She does all the accounting and billings for membership/water bills, etc. That compensation does not even come close to what we'd have to pay a bookkeeper.

The Road Dept. head gets $500. And the Water Dept. person gets paid hourly. These people may or may not be on the board.

The trick is that jobs cannot be "created" for board members. They either have to be well qualified, licensed or have some other special skills for a specific job.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

What is meant by "duties outside their board duties?"

I've heard of compensating officers for the work that they do (such as Susan mentioned) by I don't believe I've heard of compensating board members. Our declaration (CCRs) and bylaws prohibit it, and I suspect those of most associations do also.

Also, keep in mind that if you compensate people for certain jobs, especially non-professional jobs, they could be viewed as "employees" by the IRS (and the state) and the association might have to have a Federal (and State) Employer ID number, file tax forms, withhold income taxes, pay payroll (Social Security and Medicare) taxes, carry workman's compensation and unemployment insurance and so on. Also, how would the members of your association ragard this?

Does your board really feel this is necessary and want to open this can of worms?

EbonyJ (Tennessee)
Posts: 62

Posted:

Thanks for the reply. The managment company does all the bookkeeping, billing, etc.. The board member says he paid himself $25 an hr to deal with an specific homeowner issue dealing with standing water behind the homwowner house. The Corp of Engineer investigated and submitted a report to the HOA (all done for free) So Im trying to figure out how his fee can be justified if it simply seems like he was paid to make a couple of phone calls to get the Corp of Engineers out to investigate. He submitted an invoice bundling other items along with his fees and will not provide a receipt for the money he said he spent. The other issue is the way we are governed is that the officers can be compensated by the Board of Directors, but in our case they are one in the same.. No checks and balance.. We are thinking of expanding the number of the board, currently 3 to up to 7 and removing compensation from the bylaws..
any thoughts,we need to take some action cause the board will not discuss money they spend with the membership

TimB4 (Tennessee)
Posts: 21,062

Posted:

Ebony,

We only reimburse expenses.

Since your board is being paid, make sure that they are paid by check and not by a reduction in their assessment. Also, insist that the Association follow IRS rules and issue a 1099-misc for each director being paid for their time.

Personally, based on your posting, I believe that the Board member should have turned the issue over to the management company if they didn't want to handle it.

Tim

SusanW1 (Michigan)
Posts: 5,202

Posted:

We don't have a MC, so when someone's waterline is leaking or there is a problem, then this water department board member must take the call, go out and - with a crew and backhoe - dig up the line, examine it, call in someone to fix it, or fix it themselves, cover up the hole, re-landscape the area. All this and deal with the homeowner, pull permits, the plumbing company (if called in), direct the crew and make sure all the paperwork is in order, itemize the bill and present it to the HOA for payment.

Should that board member do this all for free? No - he is compensated by the hour. He has the expertise and took the time to do all those tasks.

Your board member needs to present an itemized bill for his "services".

JenniferM9 (California)
Posts: 42

Posted:

We don't pay our Board members for doing anything, and we are a self run organization in a small complex.

If a Board member wants to volunteer to complete a task, that is fine, but it seems to be a conflict of interest to pay a board member or resident to do things that require payment.

The person who has kept our books has voluntarily done this for years and every now and then will except a "gift" for her duties, but would never consider being paid.

JenniferM9 (California)
Posts: 42

Posted:

Sorry, this forum is not set up to edit posts, unfortunately. We do reimburse for expenses, but that is it.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I have an issue with board members who want to charge an hourly rate for their services. This is wrong in my opinion. Only selfish people can argue it's "truth". If your a VOLUNTEER organization that means you VOLUNTEER your services no matter if you have the skills or not. It's YOUR responsibility once you take that position of board member. Sorry you had to wait for a repairman or pull some weeds but you VOLUNTEERED to participate.

I am fully against paying money to a board member to do their duties. I volunteer for Habitat for Humanity. They don't pay their volunteers to build the houses. The homeowner doesn't pay for labor to build the house. (Except for paid contractors). Labor is 50% or more of the cost of a home. So building a 100K house only cost the homeowner 50K to cover supplies. Which makes the house affordable to the owner who otherwise couldn't afford a home. (They do get loans like everyone else). I use this example to show what the board members are actually doing when they charge the HOA for their "time/labor". If one of those volunteers decides their time is now of value (1K), they send a bill to Habitat. Now Habitat if they were to pay that bill, would have to add it onto the owner's bill. So now the owner has 51K in loans. How is that fair and not selfish? The volunteer just put the bill onto everyone else to pay.

A HOA is only funded by it's members for it's members. If you have members getting paid for what should be their duties anyways, it takes from the HOA funds. If there's not enough funds, then dues have to go up. Who wants to pay higher dues or have a special assessment due to a board member wanting paid? It's just wrong, wrongity wrong...

Former HOA President

EbonyJ (Tennessee)
Posts: 62

Posted:

After serving on several boards, when I saw the invoice it threw up a red flag for me, cause I think we are opening a can of worms that could take us to financial ruins.. The reason why I say that is that our board consists of 3 people, every year it typically ends up being 2 because 1 quits mid year. This leaves the other two to decide on how much to pay themselves with no oversight, you get two crooked people in there and there is nothing that can be done to resolve it once money has already been paid. If he would have submitted receipts and divided the items up so you knew exactly how much he was being paid it would have been more justified. But I and the mgmt company requested receipts, and he has just refused to provide. The way we are structured is the officers are also the board, so there is no oversight of one another. Not sure why the developer would do this... If we continue to pay board members , then we run the risk of IRS considering the board member an employee of the association, and they will want us withholding taxes. also the secretary should have a 1099 on file because he is acting as a vendor for his services.
I would have been more comfortable if he had not have dodged the issue, I found out the issue he was paying himself was a back log of water behind a home. The info came from the Corps of Engineers, and it was no more than a phone call to get the corps out to investigate. The Corps said they were here 1.5 hrs and that the secretary did not join him on the quarter mile walk through the woods. He simply meet him and then submitted a report. I'm not sure why he would bill us for his services in May if all of these things were done end of Feb..
I don't think that these process was anymore time consuming than prior years of meeting with various landscaping companies, security companies, obtainng bids, and walking the subdivision for all these vendors. It is a volunteer job, and most HOA boards run on a volunteer basis. I do think we could pay an outside member if we needed their skills for a service, but there could be a reasonable rate charged and they would then be accountable to get the work done to the board.
Some homeowners don't seem to even care, I'mwondering if I should just drop the issue

DonnaS (Tennessee)
Posts: 5,671

Posted:

Ebony,

You had better believe that 1099s better be filed. That is called fraud of the IRS. How do they account for the wages paid on your years end tax filing? I am assuming that someone does file? I absolutely do not believe in any officer or Board members gatting paid except for expenses incurred while doing their duty.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Some homeowners don't seem to even care, I'mwondering if I should just drop the issue

You need to sell your home, or deal with this issue. Its not going away and if you ignore it, it could end up costing you thousands in special assessments. If someone is stealing, it needs to be fixed. This would be considered stealing and you have no idea what other things are going on.

JohnM48 (Pennsylvania)
Posts: 89

Posted:

Quote:

Posted By DonnaS on 07/06/2011 10:43 AM

You had better believe that 1099s better be filed. That is called fraud of the IRS.

While your advise regarding the filing of Forms 1099-MISC is correct, actually, there is no such charge as "fraud of the IRS". There is a potential charge of "defrauding the US Government", but at least for the first offense, this would be treated as a procedural issue complete with fines. Only in the case of exceedingly large amounts in question or repeated disregard for the law would this matter be treated as fraud.

Nonetheless, proper reporting of amounts paid is required by law.

Association President

SusanW1 (Michigan)
Posts: 5,202

Posted:

Ebony - you said that your documents allow that officers can be compensated by the board and that you have 3 members on the board (all officers?)

Please print what is says about this from your documents.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

We have a similar problem. I read somewhere that if a "volunteer" Board member is paid for services that person looses any legal protection they have a a volunteer.
Board member put in many hours and it is to be all volunteer. That is my personal opinion.

PennyK (Florida)
Posts: 59

Posted:

We had a similar problem where our President was working for the same management
company that the Association used. I saw this as a conflict of interest to be
working for the same company that manages your association under the association
manager. Is this still considered compensation?

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By PennyK on 07/07/2011 8:01 PM
We had a similar problem where our President was working for the same management
company that the Association used. I saw this as a conflict of interest to be
working for the same company that manages your association under the association
manager. Is this still considered compensation?

I would say no.

If the president is being paid by the management company the same as any other employee of the management company, then I can't see how that would be considered compensation by the HOA.

HOWEVER -

To avoid appearances of conflit of interest, the president should not participate in any discussion or debate concerning the merits of retaining that particular management company vs any other management company when bids are being considered. In fact, the president shouldn't even chair that portion of the meeting and should turn the gavel over to the vice president during that part of the discussion. When the board votes to select a management company, the president should abstain. Some states would actually require this, if not in their HOA laws, then possibly in their corporate laws (assuming the HOA is incorporated).

EbonyJ (Tennessee)
Posts: 62

Posted:

It states in the bylaws The Salaries of all officers of the corporation, if any, shall be fixed by the Board of Dirrectors. The officers are President, Secretary, and Treasurer. It also states that the Board of Directors shall consist of three Directors . It also states the officers of the corporation shall be elected by the Directors from among the members of the Board of Directors

SusanW1 (Michigan)
Posts: 5,202

Posted:

Are you saying there are 3 officers AND 3 directors - or are the officers and directors the same thing?

It sounds like you should have 6 members total on the board, with 3 of them elected as officers by the entire board.

EbonyJ (Tennessee)
Posts: 62

Posted:

the officers and directors are the same.. 3 board positions for a subdivision with over 200 homes

ShirleyM2 (Colorado)
Posts: 2

Posted:

We have a board member who pushed himself into President position then pushed himself into Project Manager for doing the work on our property. The work is his company with his family as his employees. We had obtained $15 mill as a result of a lawsuit over structural problems. He has control of this money and there is no or little over oversight as to how he is spending it although continually asked by homeowners. The CO law on conflict of interest is questionable as to our protections and our By-laws do not protect us. Previously I came from a Condo community where we had a property manager to manage our property and we never allowed any homeowners to work on our property for compenstion, no bids, no anything - too messy for liability, owner-board lawsuit as the board is to be a true represntation of the owners.

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