Mileage compensation

Started by ChrisK11 • 22 replies • 962 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

ChrisK11 (Texas)
Posts: 4

Posted:

I just took over our HOA in Texas. The previous administrator before leaving wrote himself a check
for $1,200.00 for mileage. He justified it by showing trips to the HOA storage facility, Staples and post office.

I know he can claim the mileage for tax purposes but as a nonprofit HOA can he pay himself for mileage?

I couldn't find anything under Texas HOA law that would address this.

Thanks in advance

KerryL1 (California)
Posts: 14,550

Posted:

What is an HOA "administrator?" Some sort of community manager? Or some sort of position on the board of directors?

If the position involves a contract, it would specify reimbursements, if any. If a board position, your CC&Rs or Bylaws or both might say that directors (board members) and officers can be reimbursed.

MaxB4
Posts: 3,513

Posted:

The answer is its possibel, but the HOA should have issue them a 1099-MISC and filed it with the IRS.

TimB4 (Tennessee)
Posts: 21,059

Posted:

In order to help, I think you need to clarify who the administrator is.

Are they a property manager?
Are they a management company?
Are they an employee?
Are they a board member?

As Max said, it's possible.
Was there a contract?
Did the previous board approve it?

Federal mileage rate for 2022 is 62.5 cents per mile.

At that rate, $1,200 would equate to 1,920 miles.

BillH10 (Texas)
Posts: 1,217

Posted:

Our contracts with our clients stipulate we will be reimbursed for mileage at the IRS reimbursement rate for special trips to the property, special meetings with the board, association members, and contractors.

We are also reimbursed for trips to municipal offices for document filings and trips to the post office or FedEx when signature delivery services are required, such as for collection letters. Those charges are billed back to the delinquent account.

The use of Zoom and similar services has completely eliminated the mileage charge to attend special meetings, none of our clients has held an in person meeting since the Covid lockdown was initiated. We strive to consolidate meetings with contractors and association members with regularly scheduled property reviews for which there is no additional mileage charge.

We do not charge mileage for routine trips to the post office or retail establishments although we do keep track of such mileage for tax purposes.

ChrisK11 (Texas)
Posts: 4

Posted:

Wow....thank you for all the replies. Didn't expect it. Let me clarify.

The by-laws call for 3 administrators. The administrators are members of the HOA (volunteer, non paid).
The administrators select the president, vice, treasurer and secretary.
The administrator could also hold the position of president, vice, etc., if they are vacant.

To simplify it.......administrator is a board member.

I can see it being claimed as an income tax deduction but I can't see him compensating himself.

I wanted an unbiased opinion from all of you before adding to the story.

The administrator/president (he held both positions) cut himself the check the same day the
annual meeting took place and he lost his position. Furthermore the $1,800.00 he is claiming is
for the 2019, 2020 and 2021.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By ChrisK11 on 08/06/2022 12:46 PM
Wow....thank you for all the replies. Didn't expect it. Let me clarify.

The by-laws call for 3 administrators. The administrators are members of the HOA (volunteer, non paid).
The administrators select the president, vice, treasurer and secretary.
The administrator could also hold the position of president, vice, etc., if they are vacant.

To simplify it.......administrator is a board member.

I can see it being claimed as an income tax deduction but I can't see him compensating himself.

I wanted an unbiased opinion from all of you before adding to the story.

The administrator/president (he held both positions) cut himself the check the same day the
annual meeting took place and he lost his position. Furthermore the $1,800.00 he is claiming is
for the 2019, 2020 and 2021.

You may end up picking up this tab but claiming mileage for three previous years is ridiculous and I'm sure he knew this when he did it.

KerryL1 (California)
Posts: 14,550

Posted:

Again, Chris, check your CC&Rs or maybe Bylaws to see if, when & how there my be reimbursements to administrators.

BillH10 (Texas)
Posts: 1,217

Posted:

Chris

We have reviewed the documents of perhaps 50 HOA or condominium associations in Texas during the past 15 years.

Almost without exception, they have all included language which states:

1. Directors and officers may not be compensated by the Association for the positions to which they have been elected or appointed.

2. Directors and officers may be reimbursed for incidental expenses incurred on behalf of the Association. Often there is language stating the reimbursement is subject to the approval of the Board.

So, the administrator may be entitled to the reimbursement, that horse is out of the barn.

I recommend your association draft a set of rules and guidelines for reimbursing for out of pocket expenses, including the requirement to submit receipts and IRS acceptable documentation of mileage incurred, and perhaps a provision that an expenditure in excess of $NN requires Board approval before the expense is incurred.

In 13 years of managing associations, we have reimbursed board members perhaps 10 times. We much prefer to incur the expense on behalf of the client ourselves as we spent many years as upper level directors in a large corporation and know exactly what expense reimbursement documentation must be submitted and retained.

BTW, we absolutely insist no member of the Board or officer have the ability to write checks or otherwise access Association funds to make expenditures, including the Treasurer. We do not allow petty cash funds, nor do we allow association credit cards. Those stipulations are discussed during contract negotiations and, if they are not acceptable, we terminate the contract discussions.

The board members, and perhaps officers, have read only access to the bank accounts; one board member is on the signature card in the event of an emergency or falling out with the management company. That member does not have blank checks nor does he/she have access to the bank account bill payment process.

You should consider establishing tighter controls regarding the ability to expend association funds.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Chris

I thing the person is pi$$ed at something and looking to be vindictive. Without proper procedures in place, your association might just have to pay him

ChrisK11 (Texas)
Posts: 4

Posted:

ADDING TO THE STORY..........

The administrator is also the president and treasurer. His wife is the vice president and secretary.

A new law in Texas prohibits this however, they were grandfathered in since the law took effect afterwards.

The reason for the question is to see if there is a law that will trump my by-laws.

my by-law states:

Administrators shall not receive any stated salaries for their service
but by resolution of the administrators expenses of attendance, if any,
may be allowed for attendance at each regular or special meeting of the
board; but nothing herein contained should be construed to preclude any
administrator from serving the corporation in any other capacity and
receive compensation therefor.

Now you know the whole story. Let the jury deliver its verdict

Is he entitle to compensation for his mileage for the 3 years?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Not knowing how long they served on the board, I find it difficult that they claim 1,900 miles in a year for HOA work only.

That said, board members are allowed to be reimbursed for expenses.

Any reimbursement should be approved by the board and, in my opinion, any expenses should be submitted when they occurred (or at least once per board meeting).

Your board could fight this but it will likely cost more then you would recover.

My suggestion, adopt a written policy on expenses reimbursement so this isn't repeated in the future.

SheliaH (Indiana)
Posts: 6,964

Posted:

Someone should have shut off his access to the money immediately after he lost the position, but that doesn't mean you chalk it up and move on. At the very least, he should be compelled to ask a few questions, like:

Did he get prior approval at ANY TIME to do this?

If so, where's the written authorization (assumptions and verbal agreements don't count for shit)

When were these trips (date, time, start and end points?

How much per mile did he charge and what's thar based on? For example, state government has a set mileage per mile and in my state, they use a specific map to calculate the number of miles. He may have given you a receipt from Staples, for example, but how do you know a Home Depot wasn't closer?

Why didn't he ask for reimbursement in the previous years? If he was stupid to wait two or three years before asking for the money, I would say too bad so sad.

That's just for starters, and frankly, I think you know all this, but are concerned about possible fallout. If you're going to be president of the association, you need to accept that there may be times when you and your colleagues need to be the adults in the room a d make decisions some may not like.

You will need to establish formal procedures and your documents should have language that allows the board to establish additional rules and protocols that don't contradict the CCRs. While the board works on that, get an accounting firm to conduct an audit of the association's finances. There may be other checks this man wrote to himself that no one knows abou. If That's discovered, ask that he return that money as well. If records show there was embezzlement, you may need to consider filing criminal complaints.

By the way, it's OK to check Texas law, but you always start with your documents to see what they say. They won't address everything in HOA land, and neither will state statutes. That's when common sense should kick in.

Keep the association attorney informed of everything and good luck.

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

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By SheliaH on 08/07/2022 12:07 PM
Someone should have shut off his access to the money immediately after he lost the position, but that doesn't mean you chalk it up and move on. At the very least, he should be compelled to ask a few questions, like:

Did he get prior approval at ANY TIME to do this?

If so, where's the written authorization (assumptions and verbal agreements don't count for shit)

When were these trips (date, time, start and end points?

How much per mile did he charge and what's thar based on? For example, state government has a set mileage per mile and in my state, they use a specific map to calculate the number of miles. He may have given you a receipt from Staples, for example, but how do you know a Home Depot wasn't closer?

Why didn't he ask for reimbursement in the previous years? If he was stupid to wait two or three years before asking for the money, I would say too bad so sad.

That's just for starters, and frankly, I think you know all this, but are concerned about possible fallout. If you're going to be president of the association, you need to accept that there may be times when you and your colleagues need to be the adults in the room a d make decisions some may not like.

You will need to establish formal procedures and your documents should have language that allows the board to establish additional rules and protocols that don't contradict the CCRs. While the board works on that, get an accounting firm to conduct an audit of the association's finances. There may be other checks this man wrote to himself that no one knows abou. If That's discovered, ask that he return that money as well. If records show there was embezzlement, you may need to consider filing criminal complaints.

By the way, it's OK to check Texas law, but you always start with your documents to see what they say. They won't address everything in HOA land, and neither will state statutes. That's when common sense should kick in.

Keep the association attorney informed of everything and good luck.

My guess is if you ask the above questions the ex Board member will simply tell you to piss off or ignore you. As Tim mentioned how much money is the association willing to spend to collect $1,200?

It seems that the association failed to put controls in place and part of the blame is squarely on the previous Boards shoulders. My personal advice is to spend your time and money on putting the appropriate controls in place and move on. You've been had.

SheliaH (Indiana)
Posts: 6,964

Posted:

That is possible and I agree this association should have had controls in place, but I'm not at all fond of the idea of anyone doing whatever with association funds. If this guy wanted a reimbursement, he could have been an adult and ask for a vote by the new board and presented his documentation. And if he was ballsy enough to write a check for $1200 without authorization, I doubt his integrity with everything else PRECISELY because there weren't any controls.

It's one thing for you to write off $1200 of your own money, but this was the ASSOCIATION'S money. Do you want to explain to the rest of the community why you DIDN'T pursue the matter or at least check to ensure he actually accumulated $1200 in mileage (that would be fun)? I, for one, don't believe he accumulated $1200 in mileage in three years. I use a company vehicle on my job and I have to keep records that are complete and accurate because if I don't, I can lose my job and worse. As for the legal fees, you can ask that HE pay the association's expenses if they win the lawsuit.

Depending on how much shit an audit digs up, he may fold before it gets to that. In any event, this is when a message needs to be sent to ensure no one even thinks of pulling this stunt again. On top of that, I would ask the IRS about this because if he's writing checks like this, I would think that's considered income - perhaps he should be compelled to explain himself to the IRS (that may be fun to watch as well).

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

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By SheliaH on 08/07/2022 5:57 PM
That is possible and I agree this association should have had controls in place, but I'm not at all fond of the idea of anyone doing whatever with association funds. If this guy wanted a reimbursement, he could have been an adult and ask for a vote by the new board and presented his documentation. And if he was ballsy enough to write a check for $1200 without authorization, I doubt his integrity with everything else PRECISELY because there weren't any controls.

It's one thing for you to write off $1200 of your own money, but this was the ASSOCIATION'S money. Do you want to explain to the rest of the community why you DIDN'T pursue the matter or at least check to ensure he actually accumulated $1200 in mileage (that would be fun)? I, for one, don't believe he accumulated $1200 in mileage in three years. I use a company vehicle on my job and I have to keep records that are complete and accurate because if I don't, I can lose my job and worse. As for the legal fees, you can ask that HE pay the association's expenses if they win the lawsuit.

Depending on how much shit an audit digs up, he may fold before it gets to that. In any event, this is when a message needs to be sent to ensure no one even thinks of pulling this stunt again. On top of that, I would ask the IRS about this because if he's writing checks like this, I would think that's considered income - perhaps he should be compelled to explain himself to the IRS (that may be fun to watch as well).

I'll answer from a homeowners perspective. What I don't want is for my HOA to spend thousands of dollars to try and get back $1,200. I would want the HOA to cut their losses and fix the problem like they should have years ago.

If this went to court this is how I think it would play out. The judge would ask what procedures were in place for reimbursements? The HOA lawyer would answer there were none. The judge would then ask the ex administrator if he had documentation to account for 1920 miles driven while performing HOA related duties. The administrator would say something like "Gee your honor I don't." The judge would then rule that the administrator didn't violate any reimbursement procedures but he owes the HOA $1,200 since he can't prove he spent this money. As soon as the gavel comes down the HOA lawyer will turn to the HOA rep and hand him/her a $10,000 bill.

As for you other question I would have no problem explaining to the community why we did not pursue this.

SheliaH (Indiana)
Posts: 6,964

Posted:

Um, you forgot to ask that the administrator pay the HOA's legal costs if it won the lawsuit - therefore, I'd take that $10K bill and hand it to the administrator.

Or I would have checked the limits of my small claims court (which doesn't need an attorney) and if the $1200 fit that threshold, I'd sue him there. I'd also ask the attorney to check my preparations to make sure I didn't miss anything - and add THAT to the amount I'd ask for if the association won.

We have your perspective as a homeowner, which is fine, but there are dozens of others who might not feel the same as you. So we'll agree to disagree on this point. Hopefully, the OP and his colleagues learn from all this.

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

ChrisK11 (Texas)
Posts: 4

Posted:

THANK YOU FOR ALL THE RESPONSES!!!

I had a "gathering" at my home on Yesterday with the members of the new board. Unofficial talk about what was
done by the previous administrator came up. We seem to have a consensus in that:

1. The by-laws need to be reviewed and amended as necessary not only on this matter but to clarify others.

2. Allow the re-imbursement for the year 2021 and 2022 only.

3. If previous Administration doesn't agree, filed with small claims court.

4. Whatever amount the previous administration receives, issue a 1099 and request he does any amendments to taxes.

BillH10 (Texas)
Posts: 1,217

Posted:

Chris

Issue the 1099. His taxes, and amendments, are his business. not that of the association. The Board is out of line putting that in writing.

DeanJ
Posts: 1,786

Posted:

Yes he may be reimbursed for mileage expenses approved by the Board. $1200 seems like a lot.

SheliaH (Indiana)
Posts: 6,964

Posted:

I know you said this was an unofficial meeting, but be careful about those if your documents require open meetings. You may say it was an unofficial meeting and it likely was, but it’s too easy for board members to decide how certain issues will be addressed and use the official meetings as a formality. Homeowners wouldn’t hear the conversations that led to the decision and they have a right to hear them. This is how you ensure transparency.

Since this could lead to a legal something, the best way to discuss this would be in executive session, where the only people there are the board members. Generally, you need to announce those in advance and then disclose the results – here’s a link to an article stating how this would be documented in the minutes.

https://www.ibabs.com/en/board-meetings/board-meetings-executive-session-minutes/#:~:text=Record%20the%20start%20times%20and,the%20executive%20session%20to%20order.

You should also check your documents to see what they say about executive session and follow those instructions. Note that executive sessions should be RARE and limited to sensitive issues, such as board member discipline or legal action by or against the association. Talk to your association attorney for more guidance on how to do this. In fact, you may want to create a formal policy if you don’t already have one and adopt it via board resolution at an OPEN board meeting.

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

PatJ1 (North Carolina)
Posts: 568

Posted:

If a board member is not an employee, unlikely that they are, then a 1099 would need to be issued. Only employees can be reimbursed up to the IRS limit with documentation without a 1099.

A board member wouldn't be allowed to claim it as a charity contribution since HOA's are not a charity non-profit.

Our MC will only reimburse Board members and resident's for expenses supported by a receipt without 1099 information. Guess a Board member could be reimbursed for a gas receipt if the Board approves the expense.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here