use of personal credit card in making HOA payments

Started by JanieG • 9 replies • 2659 views

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JanieG (California)
Posts: 2

Posted:

For several years a board member has been paying HOA bills with his personal credit card. When Treasurer was asked by a homeowner for a copy of a bill, he was told that the board member does not submit an invoice for services. Instead he tells the Treasurer the amount and is then reimbursed by the treasurer. How can that be acceptable action on either the board member or treasurer.

BillH10 (Texas)
Posts: 1,217

Posted:

It's not and any accountant would tell you so. The Board member should (I'm being nice--must!!!)submit a copy of the original invoice which is being paid with the personal card for reimbursement.

For example: we pay certain recurring monthly charges for one of our client associations using our business credit card as the service providers insist on being able to debit a card for the monthly charge--in this case, website hosting for the association website, and the off site storage unit where records, signs, holiday decorations, and party supplies are stored. The Association does not have credit or debit cards and we would strongly advise they not have them--our opinion is they are as open to problems as are petty cash funds in the possession of board members or committee chairs.

We bill the association back, of course, for the charges. However, we also provide a copy of the invoice we receive from the service providers as an attachment to the monthly financial report.

Now, it may be way back when this process began, a statement was provided. All involved know the expense is recurring, and, if the amount does not change, a somewhat reasonable, but not auditable, case could be made for recurring reimbursement without submission of each monthly statement. I don't like it, I would not allow it as a PM or Board member, but it sort of passes the "smell test", sort of.

NpS (Pennsylvania)
Posts: 4,216

Posted:

I have a personal credit card that I only use for HOA expenditures. I email a copy of my statements to the entire board (without my card number) and request reimbursement from treas.

IMO, anything less is an invitation for fraud.

Sikubali jukumu. Read all posts at your own risk.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JanieG on 08/30/2015 6:09 PM
For several years a board member has been paying HOA bills with his personal credit card. When Treasurer was asked by a homeowner for a copy of a bill, he was told that the board member does not submit an invoice for services. Instead he tells the Treasurer the amount and is then reimbursed by the treasurer. How can that be acceptable action on either the board member or treasurer.

Janie,

This is sloppy all the way around.

First, there should be some sort of documentation to support the board member's claim for payment. Your treasurer is making a bad practice worse by cutting a check for reimbursement. I am not saying that there is anything nefarious going on; it is just plain bad practice.

My association exists mostly to maintain about 300 miles of dirt roads. We own our own road grader and other heavy equipment. Because of our remote location, the high costs of operating and maintaining heavy equipment, and a limited time frame when we can work, we opened a separate checking account specifically to give our VP a debit card to make immediate payments for what we need. Each month the VP has to account for all expenses by submitting proper documentation and the board has access to the online account to verify that no other charges were made. We deposit $6,000 from our operating account into the sub-account at the beginning of the month. We find that is normally a sufficient amount and the most we could lose is that $6,000; the rest of our funds are in another bank and not available to the VP.

I see nothing wrong with paying bills with a debit card but it should be the association's card and not that of an individual board member. Your board may want to consider opening an account for a board member to pay by debit card, although I would not entrust that card to the board member you described nor would I continue to utilize the services of your treasurer.

TimB4 (Tennessee)
Posts: 21,059

Posted:

As Treasurer, I refuse to pay any reimbursement without the original receipt.
Further more, we insist that any reimbursement expense not be combined with personal purchases.

As with others, I also make purchases for the Association with my personal credit card. Just as with paying in cash, some sort of receipt is provided. Store receipts will often only show the last 4 numbers of a credit card. Written receipts may be different. However, for those (like others) I simply blacken out the credit card number.

Your Association should insist on having receipts provided for reimbursement and have a policy stating this. Perhaps you can propose such a policy to the Board. For examples of various association reimbursement policies, do an internet search for hoa reimbursement policy and several will be listed.

BobD4 (up north)
Posts: 1,002

Posted:

JanieG (California):

If you have a professional auditor, I wonder how the unreceipted items get handled for audit purposes unless materially insignificant ? Are owners wondering what else is going on ?

NigelB (Texas)
Posts: 254

Posted:

Quote:

Posted By BillH10 on 08/30/2015 6:24 PM
It's not and any accountant would tell you so. The Board member should (I'm being nice--must!!!)submit a copy of the original invoice which is being paid with the personal card for reimbursement.

For example: we pay certain recurring monthly charges for one of our client associations using our business credit card as the service providers insist on being able to debit a card for the monthly charge--in this case, website hosting for the association website, and the off site storage unit where records, signs, holiday decorations, and party supplies are stored. The Association does not have credit or debit cards and we would strongly advise they not have them--our opinion is they are as open to problems as are petty cash funds in the possession of board members or committee chairs.

We bill the association back, of course, for the charges. However, we also provide a copy of the invoice we receive from the service providers as an attachment to the monthly financial report.

Now, it may be way back when this process began, a statement was provided. All involved know the expense is recurring, and, if the amount does not change, a somewhat reasonable, but not auditable, case could be made for recurring reimbursement without submission of each monthly statement. I don't like it, I would not allow it as a PM or Board member, but it sort of passes the "smell test", sort of.

I was elected to the HOA board in November of last year. In reviewing our accounts (we use a management company), I discovered that no-one on the board had access to the management company bill paying system. Invoices were submitted and the only review was done by the management company who then issued payment and provided the board a monthly accounting.

I got that changed and gained access to the system so that any bill paid required a board members review and approval.

Once I got access I found that the previous board had approved a credit card for the use of the management company's rep to our HOA. Nearly $5,000 was charged to the card for items such as food, gift cards, flat screen tv, and computer. Needless to say only about $130 of that total was legitimate. The rest was for the personal benefit of the property manager and had been hidden in our accounts by coding the expenses as repairs, replacements etc.

I also found that we had been paying for an electricity meter for the past 5 years that had never delivered electricity - it had apparently been used by the developer at one point and the management company had just kept on paying the monthly billing.

So there was absolutely no oversight by the board - and the HOA had paid about $7000 in fraudulent and unnecessary charges. The management company made us whole on the $5000 fraud.

There absolutely has to be an audit trail - and every payment should be backed up with an invoice or some other verifiable method which shows the expenditure. Word of mouth is not good enough.

We no longer have a credit card and any non contract expenses are paid by check issued by the management company.

GeorgeR8 (Arizona)
Posts: 182

Posted:

When someone uses their own money or credit card they give the receipt to our treasurer. She fills out a voucher and signs it. She gives it to me to sign, we require 2 signatures, and I take it to our MC. (they only do our accounting, new buyer disclosure, taxes, and collections) They mail a check to the person. We do not write checks.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Our MC basically handles all our money but we do keep a separate $500.00 checking account with the PRES, VP, Treasurer as signers. This is for must have now situation and either of the 3 can sign the check. We would also reimburse any of the 3 if they had to pay cash for something but has never happened.

Just limit your liability. He!! I have been known to spill $500.00 worth of drinks at a bar....LOL

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