Management Co. won't give Board member financial records

Started by CherylM6 • 14 replies • 2708 views

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CherylM6 (Illinois)
Posts: 15

Posted:

In Illinois, if a Management Company refuses to give a Board Member the financial records for an association and the Board member has to retain an attorney, can the Management Company be made to pay the attorney fees? The rest of the Board is protecting the Manager and has no records, and this is a new Board member who is trying to get the Association straightened out and in control rather than the Management company being in total control.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Cheryl,

The management company works for the Association. The records belong to the Association. Therefore, I would suspect that if a single board member took legal action against the MC it would be the same as taking legal action against the Association.

What needs to be done is the Board as a whole (or perhaps by majority vote) to vote to instruct the MC to turn those records over to you and failure to do so would be seen as a breach of contract. I agree that it shouldn't have to happen this way but it appears to be the way the MC wants to play it.

Question: Is the board member the Treasurer for the Association?

If not, may I ask what you (I expect that you are the new board member) intend to do with the records?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The MC is a contractor to the HOA board. The financial records being sought should be of the HOA's records not of the MC. Hopefully, that is not what is going on. I can't believe there are no records available as what do you discuss in your meetings? We had copies of our collection reports (for Board members only) and our expense report (everyone) to review at each meeting.

There may not be all the records that our mind think there are. I find people demand records and in actuality they do not exist. Like we did not have a list of owners. We had a map of the neighborhood and of course the addresses are public. However, knowing who the true owners were for each lot did not exist. I had to do the tax research on the property whenever there was an issue. So I would want to know what exact records are being denied and do they really exist outside the mind?

The board member is taking the legal route on their own and will be responsible for that expense. I don't think an individual board member can make much of a change if they are not an officer. The president seat would no doubt have more power to it. This board member should try to run for a officer/president position if they want to make significant change.

Overall, you don't always need these records. It can be determined on their own with some leg work. Just find out when the MC's contract is up and then work on replacing them. Records can be reproduced in most cases. The bank should have the records but only available to those who are on the account.

Former HOA President

CherylM6 (Illinois)
Posts: 15

Posted:

The other Board members don't question anything, or have ever seen anything. Not a contract, check, invoice, bank statement. New Board member wants to look at income/expenses, and not on accrual basis but cash basis. Wants to look at bank statements and compare income/expenses as there are multiple discrepancies in statements presented to board in accrual form. Officers don't want to be involved and have left complete management/financial to manager for years, but new Board member wants to see where money is being spent, and doesn't want to wait a year until new elections. Didn't know the financial mess until coming on as Board member.

JonD1
Posts: 2,350

Posted:

Quote:

Posted By CherylM6 on 04/22/2013 5:44 AM
The other Board members don't question anything, or have ever seen anything. Not a contract, check, invoice, bank statement. New Board member wants to look at income/expenses, and not on accrual basis but cash basis. Wants to look at bank statements and compare income/expenses as there are multiple discrepancies in statements presented to board in accrual form. Officers don't want to be involved and have left complete management/financial to manager for years, but new Board member wants to see where money is being spent, and doesn't want to wait a year until new elections. Didn't know the financial mess until coming on as Board member.

So Cheryl are you trhe new Board member who wants the records or is it someone else for whom you now seek answers?

Do you have any bookkeeping, accounting knowledge or history?

I am amazed no one on the Board has bothered to even look through the property's finances. Not saying it would be impossible just very hard to understand.

IF this is in fact the case I would say the entire Board would need to go. Do you get a monthly packet with financial records, checks, ledgers, banking statements? Does anyone on the Board have access to your accounts? Does anyone on the Board have ANY records?

How long has this been going on? How long has the MC handled the property? How long have you lived there and how long has the new Board member lived there?

IF things are as you suggest and you have FIRST HAND knowledge of financial issues than I would suggest you have even deeper problems than you might think at this point.

Overcoming the unwillingness of the Board and fighting the possibility of you or the "new member" being seen as rocking the boat will be an uphill battle.

How may units? Do you have monthly meetings? Anyone attend????
What do the other owners have to say??? Anything???

CarolR11 (Colorado)
Posts: 2,563

Posted:

Jon asks good questions, Cheryl.

CarolR11 (Colorado)
Posts: 2,563

Posted:

Jon asks good questions, Cheryl.

MatthewW4 (Arizona)
Posts: 500

Posted:

Cheryl,

As a board member you have a fiduciary duty to the members to manage and protect their assets and interests in the association. You cannot do that without access to the financial records. You have a difficult situation because the rest of the board has abandoned their duties and is actively trying to prevent you from doing what you were elected to do.

You may have to sue not only the management company but the rest of the board members to get the records. If the facts are what you described then I cannot imagine a judge ruling in favor of the current board and management company. As this all arises out of contracts you should be able to recover your legal fees.

CherylM6 (Illinois)
Posts: 15

Posted:

Yes I am the new Board member who wants the records.

I do not have any bookkeeping experience, but my daughter is an accountant and she said what I had was a total mess and made no sense whatsoever. (We got an accrual basis Budget, P&L and Ledger statements at the one Board meeting held).

We get NOTHING. No one one the Board has access to ANYTHING. No one has seen a Management Contract with this company for years; no one on the Board, or past Boards, has seen a check, bank statement, ledger, invoice.... nothing.

This has been going on over 20 years all with the same MC. We have owned just over 2 years.

What I have is Budgets and P&L's that don't add up or make sense.

24 units; no monthly meetings; Only a couple attend the annual. We have gone door to door and everyone just feels beaten and ignored, and like they can't make a difference so why try. So I am trying to rally the troops and they seem very grateful someone is finally working for the best interest of everyone.

Is that a clearer picture of a total mess? I'm in trouble aren't I?

KellyM3 (North Carolina)
Posts: 2,239

Posted:

You'll be responsible for your legal fees, in my opinion. Why should HOA dues payer pay for an investigation on behalf of a private citizen?

That said, your board is not acting - based on your assertion - in good faith. Also said, if you've told them you don't know how to read the books but your daughter calls their work, "A mess," you got off on the wrong foot on Day One.

CherylM6 (Illinois)
Posts: 15

Posted:

It's not an investigation on behalf of a private citizen - it's a Board member trying to get what Board members should have - the financial records that the Management Company does not want to release to the Board! And I did not say they were not acting in good faith - I said they have nothing and have never looked into any of the financial records. And I didn't tell them I didn't know how to read the books as I can certainly add 2+2 and when the paperwork shows that adds up to 5, that's a problem and why I want to see where the 2 + 2 came from and did we miss 1 to make it 5, or what? It was then that I took it to my daughter to see if there was the 2+2 plus an additional 1 that I was missing.

I don't want as a Board member to take money out of my pocket to pay legal fees for something I should have from the Management Company. It's certainly not for my good alone, but the good of the whole Association. I'm willing to do the work and take the time to work through the details, but why should I have to pay for the legal fees for forcing someone to do what they should be doing - releasing the records to the Board members that have a Fiduciary responsibility!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I say screw those records you don't need them to get started. It is simple math. You know how many owners/units you have (24). You know how much dues are for each home. (Example $100). So you have approximately 2,400 a month coming in. What expenses does your HOA have? Do you pay for insurance? Do you pay for a clubhouse? Road repairs? Lawncare? What does your HOA use it's money to support?

You can rough estimate much of that information. Insurance is most likely your largest expense. I would say $500 proportionally out of the 2,400. The rest would fall into line. A HOA should NOT be making a profit of any kind. It's to just meet it's bills and maybe have some savings setup for capital future repairs.

Budgets are never accurate at the beginning of the year. It's an estimate only and based on historical data. There are different accounting methods out there and accruel is just one of those methods. Their accounting software may not break things out like you want it to do. A consideration when you do look at the books.

Overall, you can do a lot of this without the books. I never knew our budget when I started and just did estimates. The budget would change each month anyways. So don't think it's written in stone somewhere. I would also look into new MC's and bringing some bids from them on the table. Nothing like bringing some competition into the mix to help too.

Former HOA President

CarolR11 (Colorado)
Posts: 2,563

Posted:

Cheryl, Many states require that the annual budget be sent to homeowners. Does IL?

Have you made your request to the PM in writing sent by registered mail? Give that a try. Cite your bylaws or state laws that gives you access to the records. Ask for specific records. I'd also request, by resgistered mail a copy of your contract with the PM.

does your board have meetings? What the heck is on your agenda if there are no financials to approve? No requests for expenditures, etc.?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Cheryl

Mel is right. You and your daughter could put together a best guesstimate budget and use is as a talking point for things to be explained.

Hope his helps.

JazzM (New Jersey)
Posts: 17

Posted:

Do your by-laws provide for access to the financial records for any member in good standing? For example any unit owner in our HOA can make a written request to review the financials with a 10 day notice and we have to provide. Check your by-laws.

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