New Treasurer to HOA,Nightmare-help!

Hello everyone. I have a lot to cover and hope you can understand why I am in need of assistance. I posted this on another site and was suggested to try here. :)Some stuff may sound repeated, but just trying to explain it all the best I can. Thank you!

I took over a Treasurer position last Sept., however the President who was also the Treasurer for the past 3 years just gave me partial books late Jan.
Here are my issues:
1)There are no bylaws, and Pres. feels no need for them, but I think they are essential.
2) She holds the checking account, with the secretary & vice- presidents name on it.
3) Tax returns were never filed for 2004, 2005, and now 2006.
4) There has been several notations on properties receiving waived annual dues, with no explanation of why, and not all homeowners received this benefit, just some.
5) I have no access to checking or savings account, only given statements, which is fine, but I haven't seen Feb. yet. She does state anytime I want to see it I can.
6) There is next to no community involvement, and the other board members have constantly canceled meetings.

Here are some additional notes to the above:
The HOA was "dormant" for a few years, and apparently it was decided when it finally started back up that since the reason stated above, homeowners wouldn't have to pay dues, or any dues already paid, would be credited for future dues. But only some homeowners received this credit, which I am currently trying to get through of who never did. This is especially difficult as there are many homeowners that were given waivers for many years, with no explanation of why. Again, trying to get to the bottom of it all.

Then there is this, the President was the Treasurer also for 3 years, and still holds the check book. I did just obtain the checkbook ledger,(left the checks with her and I will explain why next) to photo copy and review.

Now, apparently there was also at one point a Treasurer who had the checkbook, etc.. that embezzled funds. I really don't know how that was handled book keeping wise.

The President doesn't want to let go of the check book because of that past embezzelment, which is fine-however; the Secretary is on it, along with the Vice-President. This issue will be addressed next board meeeting as of removing the Secretary.

I have the CC&R's, but no bylaws have ever been made.

There never has been a managment company or audit of the books as far as I know of. I will, as soon as I can, get all these books into a professional for review.

So as you can see, I have stepped into a scarey, but I feel necessary situation to make sure all is in proper order.

What advice do you have for me to handle all this and protect myself?

Sincerely, Regina-WA State

ReginaF -

#1 One would think an HOA with cc&r's has to have by-laws. Check with your municipal clerk AND county court house registrar's office for articles of incorporation. Once you locate the by-laws look to see what the requirements are for insurance on the common property and D&O for the officers and board members, what is to be maintained and replaced from the collective maintenance dues, if the HOA is required to have an audit of the books, language here is important. As a homeowner you should have a copy of the by-laws as part of your closing documents, check with your attorney as well.

#2 Are you a board member that was voted into the officer position and assigned the duty of Treasurer or are you a non-board member appointed by the Board to be a Treasurer. Just curious because not all officers (Pres., VP, Treas. Sec.) have to be board members. How many board members are there in total? I'd be concerned why the other board members are not involved and if they have right of veto over the hard work I did, thus spinning my wheels. Wouldn't stop me from doing the work, but just a concern.

a) If there is no D&O insurance in place and you can't get it ratified by a quorum of the Board in an open meeting I'd stop right there, protect yourself and say thank you for the opportunity, but no thanks.

Let's say you get past that hurdle and there is D&O insurance or you get it ratified by a quorum of the Board in an open meeting.

#3 You and the Pres. should be signator on all deposits and withdrawals on the bank accounts if you are going to be Treasurer. I'd make this a sticking point.

#4 Has there ever been a Capital Reserve Replacement Analysis and Transition Reserve Study of Deficiencies by a Transition Engineer? If there are common elements the HOA must maintain, the Board must know the estimated replacement costs of all common elements (account for inflation), date of original construction (probably 2004 by your post), life-span, remaining years left to fund for replacement, and the deficiencies of construction so the board knows how much to budget annually, and you know what to recommend the board budgets.

#5 Dues are classified as common expense assessments, and all owners are required to pay dues board member or otherwise. End of story. Sounds like discrimination has occurred. Start collecting dues. You may consider notifying the owners of the uncollected amounts and try to collect them but ultimately you'll probably have to forget about it and move on. You think the owners are going to come before the board, or the community and say they shouldn't pay dues? They'll start paying immediately if they get a bill, otherwise, the lien process should begin.

A Treasurer is a fiduciary to the owners of the home owners. You will need to have access to all of the financial records of the HOA, and you may wish to consider resigning from that position if you are not provided access to those records. I would suggest that you propose, as Treasurer, you will need to reconcile all the financial statements each month as the statements come in. This would include any savings accounts or certificates of deposits that may not have any transactions. (You just want to ensure that the funds have not been withdrawn since the prior month). Insist on receipts for all checks and try to tie non-routine payments to the minutes where those expenditures were approved. You will not necessary need signature authority over the accounts, but you will need to assure yourself that the funds are properly protected (i.e. due care and due diligence). On the waived assessments, as Treasurer, you would need to disclose those in a footnote to your financial statements that you provide to the homeowners. I see no reason that you could not identify the lot numbers or addresses of those receiving the waivers. It would be up to the Board to explain why the fees were waived. Offer to prepare the past due tax returns; that would give you an opportunity to review bank statements for those years.

I would also prepare a balance sheet effective on the day that you assumed responsibility for Treasurer duties and send it to the board and homeowners. Keep a copy in your files with supporting bank statements. This would establish the funds amounts that you are responsible for and may serve to get you off the hook for any improper transactions before your watch.

--Maryland CPA