Bank Accounts

I'm back again. Short story, we are changing MC after many years of having no BOD, the MC took care of everything. We went to the bank yesterday trying to change the names on the account. We called the MC because there was no current owner on the Signature card. The MC showed up in less than 5 minutes demanding that all accounts be closed and we open new ones. She made such a scene that we agreed to go to her branch today. She assured us that all 16 units were current.

We went to the bank, asked for the person the MC said we needed to deal with and the MC never showed up, but she had phoned earlier in the day demanding that the accounts be closed especially the checking account. There was an issue with one of the CD's that only had the MC's name on it as a trust for our HOA. The bank rep. called the MC to get the OK to take her name off the CD and turn it over to us. The MC asked if the checking account was closed and when she was told that it was not going to be closed and it had already been taken out of her name she refused to give up the trust account.

The bank rep said it wouldn't be a problem getting it changed to just have a BOD meeting and bring in the minutes. We were also given 3 months of statements and told the check ledger was our property and not the MC's.

Just a quick check showed that there were no deposits for 14 payments that should been in that time period and $1,000+ in checks cashed that I could not identify. During those months we were told that 1 member had also paid all the back dues so he could be on the BOD which would mean there should be more.

In 3 months time our checking account has gone down $5,500, which is more than half of what we had 3 months ago. We only have a gardener, lighting, MC, water and sewer, and a quarterly insurance bill. I have already collected copies of the last years bills from all the above. The MC said she did not have to give us the records for 30 days.

Any advice? The MC kept trying to advise us it was OK to the let the non-owner that she had used as a board member in 2005 to be on the new Board because she had a power of attorney. Obviously, her advise is not the best.

Melissa,

We intended to go forward, but why is it so important that the accounts be closed?
More than $80,000 was collected as a special assessment in 2006, but was not accounted for at that time. According to the MC and all public records we can find, including the escrow company that researched the property when we purchased our unit last year, there are no liens.

I have copies of the statements from every company dealt with last year, except the MC's side Co., the insurance is $350 quarterly and the gardener's records show he collected $400 per month and nothing over for the past 5 years, he is hired as mow and blow only. the lighting is $12 per month, trash averages $312 per month, taxes are $10 per year for filing, the water/sewer bills were $13,540 last year, the MC charges $275 per month.

Everything may be aboveboard, but with the MC acting the way she is, and she has logged in more that 8 hours of ranting and raving this week, one begins to wonder, especially when she refuses to sign over more than $10,000 a week after resigning her position as MC.

Sounds like an audit is over due but in the mean time I would contact either the police or the District Attorney and explain you suspect the funds have gone missing and ask them what you need to do next.

Associations give people 100% control of their money, never follow up and then they are surprised when people steal. You made it too easy for them.

Trust.....but verify.

Although it is so much easier to let someone else do the job you should have been doing, there just might be a high price to pay.

Years ago I too chose to find blame with the Board and the MC how could they do this or allow it to happen? Over the years I went further and decided the real blame was with someone else. The OWNERS. In the end when you look closely the real reason in many cases for problems is the lack of involvement on the part of the owners.

Sit back don't bother to get involved and someday the bill for turning a blind eye to all of this will come due. Sounds like this property's bill might now be due.

No one watches YOUR money like you..............

This is a white collar crime if there is indeed any crime that has taken place. You may need to go to the District Attorney's office to report it. Plus you may want to contact your local Better Business Bureau for advice and insight.

I am still of the thought that there has been no crime committed here and agree with JonD1 for another time. It is the owner's fault for having such a blind eye to all of this. Hindsight is always 20/20 but not necessarily if you haven't been righting the ship. You may be wearing a pirate's patch on this one.

Closing the account may be something of the bank's process in this. She may want to close the account because it was set up in her company's name. We have an accounting firm who does our finances. They may have set up the account for us. So they may want to close it and transfer the money to a new account in the HOA's name. Now that you have established the proper paperwork to do that.

I am still not seeing a lot here to pursue in court. It's just too expensive to do. I would just be grateful to be able to get the MC out of the HOA, accounts in place, and setting up a budget. After that, if you ALL decide to pursue more investigation you ALL can. I would just concentrate on the now.

A lesson my HOA learned when I left is similar to this. We had bills each month of 5K we had to meet not matter what. Dues were due by the 5th and late by the 15th. So the deposits did not show up until the 15th. Bills are due on the 1st. So we basically had to keep the 5K from the month before in the bank to pay bills. Kind of a rolling balance. However, my new board who did not know a thing saw the monthly report. They saw we had 5K in the bank on the 5th of their first month in February. Announced to everybody that I was a "liar" and that we did indeed have money in the bank. Of which they proceeded to spend on their "special" projects that were turned down due to not needed or expense. The next month rolls around and there is NO money in the bank!!! Mmm... Needless to say they came to me about it... I was like you didn't listen and that balance was never there for you to spend in the first place. We were forced into a special assessment for another unnecessary project and to cover bills.

So this is why I give the advice to hold on and evaluate. You do NOT have the full picture here yet to judge. No one has balanced any books or set up a budget. You don't know of any emergency bills that had popped up or all that you all may pay for. Give it 6 months to get on your feet before deciding this whole time previous was being ripped off. You may find the same hurdles/expenses being judged in the same way when you all take over too.

I agree with those who say go to the police!

Among your monthly expenses, Tammy, you didn't mention monthly contributions to reserves to replace items that wear out. Doesn't sound like you have much, but lighting systems do wear out. If your grounds have sprinkling systems, they too need to be reserved for. In addition, you may have fencing, streets or parking areas that may need to be resurfaced, etc.

When you get your audit done, which is required anyway in CA, your auditor may be able to give you some preliminary advice about a reserves account.

Tammy I am curious who is the "we" you now refer to??? Just who supports you actions in changing MCs? Have you found a new company? Are they setting up to transition control of the property management into their authority?

I would guess you might be right if the accounts held in just her name were closed that would prevent you or the new Board from reviewing what took place. I just have to wonder who now has check writing authority now and going forward? Who has the checks? Have you taken control of CC collections? Does anyon but the MC have copoies of contracts, insurance policies, tax returns, audits ( were they ever done?), unit ledgers for CC payments, anything?

Sounds like you have quite a mess on your hands. My concern if I were you would be the support you might get going forward. When you have a group of people willing to sit back and do nothing or ask questions for YEARS and suddenly the whole status quo is turned upside down many folks will simply seek another arrangement where they can give the same amount of effort. NOTHING In that case they will need to replace the do all, take care of everything person they once had. And BINGO you are it!
And while I would support your efforts to clean up this mess as best you can I would be careful not to take on the neverending job of saving dumb, lazy, ignorant folks from themselves. It is thankless and very time consuming.

In today's world many folks are looking for someone to do the heavy lifting when required. While they concentrate on who is winning the amazing race, who Kim K's next baby's daddy is, or if their I-Phone matches up to their neighbors. Your choice is to be their savior while taking your time to do all this work and visit the bank on their behalf or set a limit as to what you are willing to do.

Life is far to short. I have learned spending my time bailing water out of the boat while others text messages to girlfriends is no longer my calling. And if their efforts have limitations so should yours.

As to the suggestion you might contact the police. Nothing you have stated up to now constitutes a crime. The police don't arrest people on accusations or suspicions. My suggestion get the new MC up and running, then collect all the financial documents you can get your hands on and either go over them yourself or hire a professional to run the numbers to determine if your old MC was in fact simply unsupervised and incapable of doing their job or were they a thief and robbing your property blind. When you figure that out it then might be time to contact the authorities.

Good luck Monday........

Carol,

We talked about an audit during the last meeting. The local owners are still afraid of the MC and did not want to have an audit done. I didn't know it was required. Does it matter if we are unincorporated?

We have nothing going to reserve accounts. There is also no maintenance done except by the owners. We have replaced outside lights, sprinklers, gone to war with gophers, torn down a bug infested broken down fence and are in the process of replacing it at our own expense.

Oh, Tammy, I forgot that you're not a corporation. What is your type of HOA called? Do you have CC&Rs? What are your various governing documents called? How do you know what laws apply to your HOA, etc.?

I believe that since you are a "common interest development," (CID), you must have a financial review done by a professional, which is less expensive than an audit, every year.

Given you have few common areas items, what was the $80,000 special assessment for in 2006? That's a lot of money for an HOA of 16 units.

Carol

We have CCR&Rs, By-laws from the 1960's. We are a PUD. We are using Davis-Sterling.com because of the links. As far as I have been told, they replaced parts of 5 drive-ways, seeded grass in the common areas, put in sprinklers and that's it. The $10,000 was left over funds. I put cement in an area 80'X 40' at my home in 2005 for $5,000 and 4 of these drive ways would fit into that space. This is the central coast and everything is high but not that high.

Its been 7 years since that money was collected, so its probably to late to do anything.

Thanks, I doubt there has ever been a review or an audit ever.

Driveway paving isn't the same as putting a concrete pad in your backyard. Driveways have to stand up to more pressure and weight. So it is more expensive to maybe do a driveway versus a concrete pad. Sprinkler systems are NOT cheap. A good one can cost 10K or more in some areas. Plus you have to factor in the cost of paying for the water and electric to run the timer system.

You don't realize how expensive things are until you get involved in your HOA. What seems simple to some is not so simple when your handling a group's money. Just something simple to give a basic example. Light bulbs. Your HOA has 20 light posts to keep up with. To save money they decide to buy in bulk. Which means paying into a Sam's or Costco account. Considering the circumstance your HOA may want a membership to both. So that is $100 in 1 year membership fees. That is just so you can buy 20 light bulbs in bulk for $25 versus $40 individually at Lowes. It is just light bulbs and now your HOA is up to $120.

My question now is you see that $120 charge would you go blame someone for misuse of funds for light bulbs? Your HOA now has the ability to buy in bulk for future items but what started it was buying light bulbs. I didn't even get into what if you had to hire an electrician to change out the bulbs...

So don't assume things at your individual costs translates into a group cost. There are different variables into play here. You will learn.

Steve asks a good question. With only 16 properties I believe such could very easily be self managed.

It might well be you do need an MC to get a better feel of your finances but one that is achieved, I suggest you look at being self managed.

Hope this helps.

Your thinking makes sense, Tammy. Your HOA has been through a lot and professional help for a year makes sense to me.

Just wondering what were you paying the former MC?

And at this point self management IMO would be difficult with no one having any real understadning of what needs to be done and just who would step up and take on all of this now?

Anyone willing to be available 24X7 that live on this property?

And Tammy I would NOT go down that road on this property if I were you.