Question

We discovered the MC was paying for holiday dinners using HOA funds. The legal team said this is normal but it doesn’t seem right to me. Is this legal? I don’t see it anywhere in the minutes but the MC accountant said it’s normal occurrence. She was question because our previous PM who was fired by the MC showed the invoices to a homeowner for those dinners.

When I was on the board, we did one or two holiday dinners (I didn't attend because I was usually out of town at the time), but I believe everyone paid for their own meals. I agree this should be reflected in the minutes, meaning there was a motion and a vote to approve the expense. Was these dinners for the board members? If so, did you ask the BOARD about this?

There are two ways to look at the idea of a holiday dinner. One is that this is a show of appreciation for the work the board put in through the year - as long as this isn't a junket at, say, Ruth Chris, I'd be ok with it. I don't see people clamoring to be on the board because they'll get a free dinner at the end of the year.

The other way is that even this could lead to other questionable expenses that only benefit the board, and that could be the start of a domino effect where the board members get all the perks, which is inappropriate because HOA resources should be used to benefit the ENTIRE community, not just a few people.

I'm a little disturbed at the previous property manager's action - if you're going to show these invoices to one homeowner, why not do that for the ENTIRE community? After all, they're the ones who elect and re-elect the board members. If you are the homeowner, why didn't YOU go to the BOARD with your questions? Was this a first-time thing? Were these dinners for the board? The property manager works at the board's direction, so this had to be authorized by them and I would expect to see this expenditure reflected in board meeting minutes with a motion and vote for the same.

There is extensive case law on the subject of the enforceability of covenants as contractual terms. If the covenants limit how HOA funds may be spent, then not spending outside those limits may be enforced in the courts.

I acknowledge that you are the expert on every single aspect of every single HOA in the country, and none of us should even bother posting because you, and only you, always have the right answer, but what the OP originally posted was "is this illegal" and there is nothing factually incorrect about my response.

Say, Janet, who was treated to this holiday dinner? How many? Or are there more than one holiday dinners a year? Who signed the check to pay for this expense?

The legal team? *&^%$ Who is this? The attorney representing the management company? Who is "the legal team's" client? I can just about guarantee it is not a team. I can just about guarantee that if the MC is playing "the legal team" card that the MC is full of know-nothing nonsense.

The dinners where over a period of 6 years receipts totaling $6,500. Nothing is in the minutes regarding these expenses. The MC paid this money to a vendor but the accountant said the Board approved. Checked our documents and it clearly states what assessment fees can be used for and it doesn’t mention dinners. How do we go about addressing this to see what occurred? We are in central California.

Uh,augustin, you did read the next paragraph, didn't you? I said this sort of thing could lead to abuse.

I get what you're saying - a dinner paid with HOA funds could get the side eye, even if it's once a year because some people won't stop with that. That said I know some codes of conduct that allow for small tokens, such as a coffee cup or things that don't exceed, say, $15.

(oh wait, no one seems to like these for HOA boards).

We always talk about the difficulty of finding board members and since they cant get a break on assessments (which they shouldn't) I dont see a problem with a year end get together.

PROVIDED the homeowners are aware of it and approve the expense it's noted in the annual budget, only happens once a year and the cost of the dinner before taxes and tip doesn't exceed a certain dollar amount. That doesn't appear to be the case in this community and the board should explain themselves.

Sounds like a back door Mickey Mouse way to get the HOA to pay for these junkets. MC has the Dinners , then bills the HOA for "X" expenses.

This is one of those MC/HOA grey areas that crosses lines. You have to keep in mind the MC is a paid by te HOA to handle the HOA's business/accounting. They don't actually to make HOA financial decisions but do what the HOA tells them to do. A check should not be cut unless signed off by the HOA board.

The holiday dinners if were given by the MC should have used their own company funds to pay for it. Nothing wrong for the MC to "buy dinner" with their own money. Most likely not going to happen but if it does, then okay. However, the MC organizing a holiday dinner/event on the HOA's dime... Different story. The HOA has to agree that it is a social event they are willing to pay for and the MC to cut the check for.

So does your HOA have a "social" budget? Then this may be allowable. If not, then I would explain the relationship should be and not be.

I agree with others that this smells. The fact that there seems to be an effort to hide the expense suggest that the folks involved know it's shady - if it were truly OK, the info would be made available.

If board members were being treated to dinners at the HOA's expense, they're compensating themselves which is often prohibited by the bylaws. And the manager shouldn't be treating them to dinner, either - this looks like a quid pro quo, and our previous manager would have gotten fired by her employer even if she'd used her own money.

If I were in that community, I'd be talking to neighbors about throwing out the bums and electing honest board members.

I’m never one to jump to CORRUPTION! so I think there’s still a lot more information that’s needed.

Who the dinners were for, what GL they were coded to, is there a line item in the budget for events, what prompted the original request to see the invoices...I do wish posters would tell the whole story instead of asking cryptic questions.

At this point, I am still tripping over the phrase "legal team" used by the manager (and what a sorry manager I bet this person is).

JanetB9 posted recently about a California HOA. Maybe this is the best news for this thread I have seen so far. The California statute for HOAs gives her more options, to address possible wrongdoing, than most any other state.

My HOA in Ca. had every year a Volunteer Recognition Dinner for both the Person and their partner at a local Restaurant. It happened for years before I was on the board and my 8 years when I served. We had a budget every year of $1500.00 and normally had about 25 attendees. These people were on several committees and volunteered their time over the course of the year. Without good volunteers you end up needing PMs for more duties around the community and that raises expenses much more than the once a year Holiday event. They were always a big hit with our Volunteers. We had Landscaping, Social, Technology and Gate committees. We had 438 SFHs in our HOA.

Since retiring and moving to Texas into a much larger HOA with over 1400 SFHs we have no committees and our board does not think we could get volunteers if we wanted to start them. I disagree but have not felt it is a Hill I want to possibly Die on. Volunteers are a great way to seed future board members.

Janet,
Okay if that is truly the case then it needs to be called out and the answers. You should never have a receipt that does not match the reason for payment. At this point I would question all of the recent payables. I can't remember if you are on the board or not. If yes I would request a Forensic Audit be done and if anyone voted no to that I would say I want a Role Call vote so that each and every board member would have to defend Why Not.

Board members have a Fiduciary Duty to keep their eyes WIDE open.

Okay, when you first said “dinners” I thought you were talking about some kind of catered event. Now it sounds like just a bunch of restaurant receipts. And certainly paid to a painter is... odd. I don’t think it really matters at this point who ate the food - I think those of us who were asking were thinking these were volunteer appreciation events or board functions.

Let’s go back to the beginning.

How did these receipts come to light? You said the prior manager was fired for showing them to a homeowner. What’s that story? How did you become aware of them?

Have you asked the other board members to explain what they are for?

All expenses have to be accounted for in a general ledger category. Can you find the corresponding journal entry for this invoice and see how it is categorized.

So, Jnet, it's the same painting vendor year after year who gets dinners? Maybe Google that company just to get a quick idea if they're linked with your MC or an individual board member

These "receipts": Are they to restaurants, or what?? . I'd look at disbursements on your financials too. Just look at the last couple of years, I'd say.

The receipts are for a yearly birthday dinner at fine restaurant. it was paid by the MC to the painting vendor. No Board approval of it. Two Board members said those those birthday parties at restaurant but they thought the vendor treated them to the event. These expenses were paid using HOA funds. There’s could possibly be more. Idk. But for now the total is almost $3,500. Nothing is documented in the minutes to disclose these expenses paid using homeowners money. What should be done about this?

In my opinion, there are two courses of action: One for a director and one for a member.

-- Possibly in executive session, a director could motion to consult the HOA attorney on these payments; ask the HOA attorney whether they should continue; and ask the HOA attorney whether the HOA should seek reimbursement from the vendor for the last several years of inappropriate billing. There are a few reasons I think this should maybe be done in executive session.

-- A member may immediately wish to request IDR, on the grounds the Declaration is being violated, and seeking an agreement from the Board that it will (1) no longer pay for these dinners and (2) seek reimbursement from the vendor for these dinners.

Janet, your story keeps changing and you haven’t answered the questions that have been posed to you.

No one on this forum has a magic solution for you, not are we in a position to fix this for you.

Talk to your other board members and decide amongst yourselves if you want to pursue this. Do what you would do in any scenario if someone who works for you spent your money without your permission and can’t explain what it was for.

I've been managing HOA's for 13 years now, and I have seen a lot with a variety of different types of complexes. This is about as strange of occurrence as I have seen, considering it supposedly involves a painting vendor. If you were the one fielding the question, wouldn't you want a more clearer grasp of the facts before asking for advise?