What are the consequences??

Hi
I was asked to join our board as president to "sort things out".First thing an audit was insisted upon (first one ever!)

In the process of researching things and getting stuff ready for the auditer,the S*** has hit the fan,revious president was treasurer also,only three board members when there should be 7 (no one else interested)
O.K. here goes,a contract was written and signed by the president purportedly agreed unanimously at a meeting in a certain month,however there was no meeting that month or the previous month,the contract was to what turns out to be his partner,there is an addendum also stating that the $15 per hour he would be paid would include all parts,etc.it appears the HOA treasurer paid him for the parts,I have attended every meeting for the past two years as a member of the audience,we were all under the assumption that the work his partner was doing was voluntary,in my opinion the price the board was paying was inflated and often the work was not done,however that is suposition on my part.

Next problem,another board member prior to being on the board performed paid janitorial duties,he was then asked to join the board he continued his paid duties plus was being paid for cleaning up foreclosed homes to keep the yards etc. decent,to be fair this guy has done a superb job however,problem one,he has no contractors licence,problem two,the check was paid to his daughter and PROBLEM 3 neither of these people were given 1099s in any financial year.

So my dilemna is do I wait for the results of the audit to react? or react now,in both scenarios I have no idea how I should react,is it a lawyer thing,a police thing,or a slap on the wrists you must resign thing.One of these people has a lot of support on the board (albeit they do not know what I know)and with the latter person I have a real problem because he does such a superb job for the community.

I promised to sort this board out and in no way toi I want to appear complicite and advice very gratefully received.

Thanks so far,problem appears that these TWO people were not issued 1099s but three other contractors were.
Do I insist they resign,do I wait for proof from the auditor,this has been going on for the past two years at least!

Stewart,
Oops, too many unknowns.

‘I was asked to join our board as president to "sort things out".’

Hmm.

‘First thing an audit was insisted upon (first one ever!)

Chapter 720 specifies if only financial review or audit is required. It is based on the annual budget of the community. Also, your By-laws should clarify if the owners must vote to authorize audit should your operating income be less than $400K. (Such audit can cost over $5K)

‘a contract was written and signed by the president’

After the audit or financial review report is issued then the BOD can decide what to do, I would think. The board can always null the contract and let it go, unless there is a lot of money involved and the Association wants to take some legal action against the ex-president?

‘only three board members when there should be 7 (no one else interested) ‘

The membership really ought to try their best to fill those positions at the next meeting. If the membership believes seven directors are an overkill, amending the By-laws to ease this requirement could be considered.

‘another board member prior to being on the board performed paid janitorial duties’

If your By-laws allow to hire a director as an employee that could had been perfectly ok although I believe the new law states that no director can in any way financially benefit from the association. Otherwise John covered the IRS issue quite accurately.

This is what FL 720 has to say about financial reporting:
(7) FINANCIAL REPORTING.—Within 90 days after the end of the fiscal year, or annually on the date provided in the bylaws, the association shall prepare and complete, or contract with a third party for the preparation and completion of, a financial report for the preceding fiscal year. Within 21 days after the final financial report is completed by the association or received from the third party, but not later than 120 days after the end of the fiscal year or other date as provided in the bylaws, the association shall, within the time limits set forth in subsection (5), provide each member with a copy of the annual financial report or a written notice that a copy of the financial report is available upon request at no charge to the member. Financial reports shall be prepared as follows:
(a) An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles as adopted by the Board of Accountancy. The financial statements shall be based upon the association’s total annual revenues, as follows:
1. An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare compiled financial statements.
2. An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare reviewed financial statements.
3. An association with total annual revenues of $400,000 or more shall prepare audited financial statements.
(b)1. An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.
2. An association in a community of fewer than 50 parcels, regardless of the association’s annual revenues, may prepare a report of cash receipts and expenditures in lieu of financial statements required by paragraph (a) unless the governing documents provide otherwise.
3. A report of cash receipts and disbursement must disclose the amount of receipts by accounts and receipt classifications and the amount of expenses by accounts and expense classifications, including, but not limited to, the following, as applicable: costs for security, professional, and management fees and expenses; taxes; costs for recreation facilities; expenses for refuse collection and utility services; expenses for lawn care; costs for building maintenance and repair; insurance costs; administration and salary expenses; and reserves if maintained by the association.
(c) If 20 percent of the parcel owners petition the board for a level of financial reporting higher than that required by this section, the association shall duly notice and hold a meeting of members within 30 days of receipt of the petition for the purpose of voting on raising the level of reporting for that fiscal year. Upon approval of a majority of the total voting interests of the parcel owners, the association shall prepare or cause to be prepared, shall amend the budget or adopt a special assessment to pay for the financial report regardless of any provision to the contrary in the governing documents, and shall provide within 90 days of the meeting or the end of the fiscal year, whichever occurs later:
1. Compiled, reviewed, or audited financial statements, if the association is otherwise required to prepare a report of cash receipts and expenditures;
2. Reviewed or audited financial statements, if the association is otherwise required to prepare compiled financial statements; or
3. Audited financial statements if the association is otherwise required to prepare reviewed financial statements.
(d) If approved by a majority of the voting interests present at a properly called meeting of the association, an association may prepare or cause to be prepared:
1. A report of cash receipts and expenditures in lieu of a compiled, reviewed, or audited financial statement;
2. A report of cash receipts and expenditures or a compiled financial statement in lieu of a reviewed or audited financial statement; or
3. A report of cash receipts and expenditures, a compiled financial statement, or a reviewed financial statement in lieu of an audited financial statement.