Lack of transparency/Withholding financial records

Cynde, it's too long to cut and paste but I suggest you download a copy of Colorado's CCIOA: http://www.hindmansanchez.com/sites/default/files/resources/06027916.PDF and read section
38-33.3-317. Association records. There are very few HOA records you are not entitled to.

Thank you Glen and John for your responses-

I have read the Colorado law (in specific the section regarding records), and even used that to substantiate to the powers that be that I do have the right (both by Colorado law) and by my association's bylaws to examine the records...I still have received no response.

Prior to our outsourcing, we were self-managed. I understood it was because of our small nature that a MC would be appropriate; ie: it doesn't feel good to confront your neighbor regarding covenant enforcement, when you see that person several times a day in the neighborhood.

How do smaller HOA's deal with self-managing and finding a healthy boundary between enforcing rules and remaining neighborly?

Thanks again-

Self managing can be done, and there are companies or lawyers who will do just the violations part, so the board does the inspections and hands it to them and they are the ones "policing it" by sending out the letters etc. We had discussed the first letter coming from the board, but decided all of it would be best coming from an attorney from the get go.Worth the money and we would only pay per violation, we did not have to put a retainer up.

I wanted to offer an update since my last discussion/posting, and as a result, I have more questions...

A special meeting of our association took place last night, to discuss the issues of our current management company, and the Board's executive decision to limit the role of the MC to a "financial-only" standing. Apparently, the MC resigned 4 months ago, stating that they were no longer willing to engage in business with a neighborhood with so many extraneous demands, etc. The Board requested that the MC continue to provide financial-only services such as bookkeeping, dues collection, etc. MC agreed to stay on in this role; however, no contract was signed. At the meeting last evening, I asked the president if we could bring our financials back in house, and personally offered to serve in capacity of bookkeeping, and was told that we needed to continue with MC unless and until he got fed up with emails from homeowners requesting clarification of the financials and quit. Since my last posting, I have documentation via bank statements that he has not paid bills on time, and balance statements and income/expense reports are bogus.

Here are my questions:

1.) I verbalized that I do not think it is a good idea to continue to engage in business with the MC, mostly because they being paid to provide a service and are incompetent, but especially with regard to not having a signed contract. The president disagrees, and verbalized to me last evening that he doesn't want to tell the MC that they are being relieved of their duties, because he was "begged" in a pinch to stay on 4 months ago when he wanted to resign. Any options here? Suggestions to proceed?

2.) Our current secretary is an attorney that handles the MC's delinquent collection accounts, as she does for several other MC's in our area. Does this present a conflict of interest for her, as she is being paid by the MC for services rendered (ongoing), as well as serving in this volunteer position? She has disclosed at board meetings that she has a "business relationship" with the MC.

3.) Our president is stating that he believes we should hire a CPA to perform an audit of our entire books since the inception of the neighborhood back in 2006 to the tune of several thousand dollars, as a way to show the MC is not, and has not, misappropriated funds. I have no evidence, nor have I ever verbalized that I believed the MC was misappropriating our funds, only that he is not performing functions that he was contractually-obligated to perform. Under what circumstances are audits typically performed?

Thank you-

1.) Annual dues are $600
2.) 2014 budget for maintenance was $4400, of which $897 (to date) has been spent.
3.) Our 2014 budget included $2,400 ($200 monthly) allowance for management fees; however, as the MC resigned 4 months ago, it was agreed that he would be paid $50 monthly for financial-only services.
4.) I do not know if our secretary has an ownership interest in the MC. I believe she just provides services on a per event basis. It is interesting to note, she is the only board member that is able to consistently get in contact with the MC, and I wonder if that doesn't have to do with the business relationship that she maintains with him?

You are right, there is much more to the story...haven't shared the complete history but will try to highlight and respond to specific questions-

We have other sources of income, which includes lease money we receive to lease water shares intersecting our development, and various assessments, as we are not yet completely built out. For instance, for 2014, our income was $12,030 and our expenses were $6,698. Our working capital has increased pretty steadily since July of 2012 as that is when the MC took over our records, and that seems to be the time when the breakdown with regard to maintenance occurred.

I am having a hard time understanding the reason for the MC resigning as well. Perhaps the MC was unprepared for the unique conditions of our development, and thought that, upon first glance, it would be fairly straightforward and hands-off. The truth is, we have a 22 home development surrounded by 35 acres of open space which consists of native grasses, non-deciduous trees and more weeds than probably exist in the entire state of Colorado. The MC owner (and operator) is an acquaintance of one of our ARC members, and was recommended based on the fact that his bid came in lower than any other MC. The MC was hired, sight unseen...without referrals or exploring other options (and because the association was hopeful that a MC would be in our best interests)- because the current treasurer who was functioning in a management capacity was resigning and there was no other volunteer to assume that position. The association was against a MC from the beginning...mostly because they were against dues increasing and they were concerned that we would lose control of our neighborhood.

The contract from the MC that was signed by the current board (at the time in 2012) sounded amazing...we were to get open space maintenance, bookkeeping services, covenant enforcement, etc. for $200/month which I thought was actually very reasonable considering the depth of the services provided. We were to be able to keep all of our previous contractors for weed control and mowing- which negated the MC getting bids on our association behalf, etc. and everything sounded great. Problems with the MC taking over were apparent from the beginning, however. Contract was signed July, 2013 but the MC did not actually begin performing any duties until September, 2013 as they required that we transfer funds to their banking institution and the bank account was not set up until 9/12/13. It should be noted that the failure to get started was due to the MC not returning emails or phone calls and then blaming the previous treasurer for the books being a disaster, which was absolutely not the case.

As the MC was not prepared to actually begin performing management functions, the board was forced to send out quarter 4 dues and pay bills. When the MC finally got set up, bills began to go 30+ days in arrears until they were paid. The most recent bank statements I have requested show that we have had bills going 90 days before being paid. The Income and Expense statements I have requested to substantiate our account standing show budgeted items instead of actual income and expenses. I have asked the MC many other questions about our financial standing, and have been told time and time again that bills are being paid on time, and our finances are being taken care of...but the bank statements are showing otherwise.

Back to the resignation of the MC: I think that when they were faced with the fact that they were going to need to put forth a significant amount of effort to coordinate maintenance services for the association, paired with the bookkeeping and receiving discontent emails from owners and board members, they realized it was not worth what they were being compensated. As I understand it, the MC is responsible for other suburban associations with 140+ houses with greenbelts and clubhouses and that is quite different from what is required in our neighborhood.

Again, I don't believe that there is any improper use of association funds. My position is that not performing contractually obligated duties from the beginning, and then later misrepresenting the truth with regard to our financial standing has created an environment of mistrust, especially when it appears that the board is protecting the MC instead of the best interests of the neighborhood.

And how many units are paying fees?

Currently, 21 units are paying full dues. One unit is left for construction, and dues for an unfinished lot are $35/month. When the MC took over, we had 5 unfinished units.

Delays of one or two months are not unusual, especially during transitions.


Emails and phone calls from who? From a Board member or from homeowners who want to know why things are taking so long.

As many posters to this forum have stated, a designated single point of contact is preferred. It can get overwhelming to an MC if every board member expresses their individual views. And opening things up to the entire community would be disastrous. Having a single point of contact makes sure that the MC is getting a clear and consistent message.


Not desirable, but again not unusual in a transition.


If these are material deficiencies in the way things are running, they will be revealed by your independent CPA. Whether a defect is material or not is a professional judgment call. (Just because something occurs once or twice does not make it material.)


If the MC handles other neighborhoods with greater management needs than yours, it doesn't make sense that they would struggle serving your HOA. The one thing that stands out is "discontent emails from owners and board members." The question you should ask yourselves is whether your HOA has inundated the MC to a point where they want to shield their staff from excess.


Ok. So you should be able to breathe a bit easier.


If we were going to discharge every contractor (including MCs) for every performance failure or lie, we would have no providers. Trust is built over time. It doesn't get mandated. And no one likes to be micromanaged. Are you sure that this isn't at the root of the problem?

Your have strong opinions on what is in the best interest of your community. So do I. But when I get outvoted by my fellow board members on an issue, I don't conclude that they aren't working toward the best interest of our community. The problem with "best interest of the community" is that anyone can define it any way they want. It's an ideal, not a standard of performance.

Also, one of the difficulties of being a small HOA is that, financially, you aren't that important to your vendors. The smaller you are, the more you need to think about making the relationship work for them. If they aren't responsive enough for your needs, then it may be time to move on. But moving on is disruptive, and your Board may not be ready for a change.

Your impatience is working against you. IF you continue to stand in judgment and to demand that things get resolved to your satisfaction in the time frame that you set, you will be rebuffed by the board.

The difference between a material and a non-material deficiency is that if the Auditor finds a material deficiency, it will be described it the Auditor's report. Materiality is a professional determination. There are generally accepted auditing standards that the Auditor will apply. It would be best for you to wait for the analysis by an independent professional who is applying these standards when evaluating the financial condition of your association.

Regarding accrual method accounting for water leases, if there is something improper, the Auditor will find it. If the Auditor hasn't found an impropriety, then why would you conclude that someone isn't fulfilling their duty?

The board has the authority to extend the relationship with the MC through February if, in their judgment, that would be in the best interest of the association. It's their call, not yours. If you want to make a change, then vote them out of office.

Your postings are severely judgmental. It is in your best interest to focus on having an independent professional review your association's books.

If I lived in your community, I would find fault with a board that turned the bookkeeping over to someone who volunteered who was neither a Director or an Officer. I would want to know what qualifications that individual had. And if that person could not explain the differences between cash, accrual, and modified-accrual accounting, then I would strongly object.

You have conveyed your message. Although the board is not moving at the pace you would like, they know you are vigilant, and if you give them a bit of breathing room, they will get things turned in the right direction. Push for the audit if you want to know what is going on.

Well said.