Conflict of Interest

Started by RobertH32 • 10 replies • 1383 views

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RobertH32 (Maryland)
Posts: 1

Posted:

Our Treasurer is paid a annual salary to do the HOA bookkeeping. This seems to conflict with our By-Laws printed below. We are in Maryland. Trying to find the correct answer!

(d) Treasurer. The Treasurer shall receive and deposit in appropriate bank accounts all monies of the Association and shall disburse such funds as directed by resolution of the Board of Directors; shall sign all books of account; cause an annual report of the Association's books to be made by a public accountant at the completion of each fiscal year; and ensure Income Tax forms and a Maryland Personal Property Return are submitted for each fiscal year.Shall prepare an annual budget and a statement of income and expenditures to be presented to the membership at its regular annual meeting, and deliver a copy of each to the Members. In addition, the Treasurer shall maintain all financial records of the Association and transfer such records upon his or her replacement. The Treasurer shall be allowed to delegate to an outside accounting/bookkeeping firm, with the approval of the Board of Directors, the collection, deposit and disbursement of monies by establishing a reasonable method of accounting to be approved by the Board of Directors. The treasurer and the Board of Directors shall review the financial reports not less than quarterly.

Section 4. Compensation. No director shall receive compensation for any service he or she may render to the Association. However, any director may be reimbursed for actual expenses incurred in the performance of his or her duties.

SheliaH (Indiana)
Posts: 6,964

Posted:

Your answer may be in section 4 - "However, any director may be reimbursed for actual expenses incurred in the performance of his or her duties."

In most cases, that may mean something as simple as, say, going to Staples to run off copies of the newsletter and getting reimbursed for that, upon presenting a valid receipt.

That being said, if your treasurer is doing all the things listed in your bylaws, I would imagine that takes A LOT of time. I was treasurer of my HOA and while our property manager put together the actual reports, I still had to go through them to prepare the treasurer's report, get answers to anything that looked weird and then put it together in a monthly report for our board (attached to our minutes). Even that took several hours once a month.

So, what did your board say when you asked them about this (you did ask them, didn't you?) Do you have a property manager or are you self-managed - if so, I wouldn't expect your treasurer or anyone else to do all that work for free. Have you asked for any receipts the treasurer has generated in performing his/her duties? Does the treasurer an actual board member with a vote or is this someone appointed by the board to perform these functions? I would hope the board negotiated some sort of contract and is submitting the proper tax records to the IRS and state revenue department (because the treasurer should be reporting this on his/her income tax return).

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

KerryL1 (California)
Posts: 14,550

Posted:

Welcome to HOATalk, Robert.

Along with Sheila, is your treasurer a director? Some HOA Bylaws, including ours, allow the board to appoint a willing owners to be treasurer.

This treasurer's duties in your HOA are considerable and are very similar to our bylaws. But we have a Mgt. Co., and Our prop. Mgr. (PM) who do all you describe. In our HOA, no one would volunteer to be treasurer if they personally had to do all of that. Instead, our treasurer oversees the MC's materials and chairs our Finance Committee.

But we're a complicated high rise HOA. What size & type is yours, Robert? Perhaps you need a MC or at least someone to do you bookkeeping.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Robert,

One thing to keep in mind is that Officers (President, VP, Treasurer, etc.) is one position and a Director is another position.

Directors make the decisions for the Corporation.
Officers implement those decisions and carry out the day to day activities of the Association.

Often, and typically, there are not enough volunteers and the Officer positions are filled by the individuals also serving as Directors.
When this occurs, it is the same as someone having two jobs.

Therefore, as an Officer, the individual serving as Treasurer may be paid for the duties assigned to the Treasurer. However, you need to be careful doing this as they then become an employee of the Association and should be receiving W-2s and the Association should be paying payroll taxes, etc.

We utilize an independent contractor to perform bookkeeping duties.
This way we do not have any employer taxes.

So, to answer your question, I do not believe there is a conflict.
However, it's possible that your Board may have an employee and needs to comply with IRS and State regulations regarding such.

Tim

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Our Bookkeeper was also the Treasurer. That is because she was a HOA member and owned a bookkeeping business. So we paid her company like $200 a month to collect and pay bills. There was no conflict of interest. She wasn't profiting from us as we had a paid contract. Plus no one had an issue with it.

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

A BOD Member being paid by the BOD to perform services is fraught with potential trouble. Can it be done? Probably. Should it be done? No.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MelissaP1 on 11/14/2016 2:13 PM
Our Bookkeeper was also the Treasurer. That is because she was a HOA member and owned a bookkeeping business. So we paid her company like $200 a month to collect and pay bills. There was no conflict of interest. She wasn't profiting from us as we had a paid contract.

Melissa,

Your example would be the definition of a conflict of interest.

The conflict was disclosed (and hopefully, the individual didn't vote on awarding the contract).

It was fine to do this, but the conflict still existed. Everyone was simply ok with having the conflict.

KerryL1 (California)
Posts: 14,550

Posted:

Thanks for clarifying this, Tim, to Melissa and others too. There's a lot of confusion about this topic.

KerryL1 (California)
Posts: 14,550

Posted:

I'm thinking that I disagree with Tim in this case. IF the treasurer also is a director, I don't think, per Robert's bylaws, the treasurer can be compensated. While s/he occupies two difference positions, it is one person. Reimbursement is OK.

And if the treasurer is a director, s/he, as Tim does point out, should not vote on the appointment to treasurer. She cannot because it definitely IS a conflict of interest. But if all directors understand & acknowledge the conflict of interest, the Board still might approve that person as treasurer as it's the best deal they can find.

On balance, though, I agree with JohnC that while this arrangement can be done, it shouldn't. It can arouse suspicions among h'owners that there's favoritism or some sort of hanky panky going on. It also might be harder to, say fire the treasurer as bookkkeeper since all directors know her & voted hr in.

SamE2 (New Jersey)
Posts: 310

Posted:

According to your bylaws as you presented them it is clear a director can not be payed for any services provided. If the Treasurer is an officer of the HOA based on what you provided he can be payed as long as he is a not board member. If he is an officer and can be paid you may be able to treat him as an independent contractor and 1099 him.

SueW6 (Michigan)
Posts: 814

Posted:

Treasurers on a Board are NOT bookkeepers!!

You don't describe yourself (how big and number of HOA units, dues billings, etc.) but if you have accounting work that needs to be done, then you should hire someone to do that. If your treasurer happens to be a bookkeeper, good for you. Her/his hours should be compensated.

Get a quote from another bookkeeper to see just how much work you are asking your "Treasurer" to do.

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