Signs of Embzelment

The first four are hearsay to me:

1) Some vendors have not been paid for over 4 months of services;
2) When the on of those vendors asked to be paid, instead of paying them the Treasurer asks for invoices from those same vendors for the time period going back to when she back treasure;
3) After being shown the financial statements for the line item expense related to those vendor's services, which is primarily grass cutting, the vendor confirmed he did not charge anything near those amounts;
4) The Treasurer left the annual meeting in February right before she was to go over the Treasurer report so there was no treasurer report at the annual meeting;
5) Accounting statements do not tie from month to month - There is no cash flow presented but beginning cash balance and expenses and changes in assets and liabilities does not tie to the ending cash balance for many of the months last year. The previous' treasurer's accounting always tied to the penny
6) Accounting statements have inconsistency in formatting. For example one month a specific line item will have a $ in front of its figure and another month it doesn't. Same with cents, one month a line item might be in the format xxx.xx and another month the same line will just be xxx-no cents. Formatting and indents are also off month to month.

If concerned, ask to see the bank statements and check register.

Roger,
Seems sloppy to me. I have no experience with people who embezzle funds, but my assumption would be that they would cover their tracks a little more than this person has. Sounds to me that you need to have someone outside your board doing the books and paying the bills.

When board members get elected and board positions get assigned that does not make them an expert at that job.

Granted, I can't see things the records myself, but this mess says incompetence and neglect to me rather than embezzlement.

People who want to embezzle usually try to hide their actions, not scream "hey, look at this mess!". The most accomplished embezzlers will produce records and reports that look perfect, and accountants really have to hunt for discrepancies that are buried several layers deep.

That said, any auditor would cite the association's lack of financial controls and other things as problems. So just because this isn't embezzlement or deliberate dishonesty doesn't mean things are OK. I'd say that they're not. The first thing I'd do is check to see what kinds of Fidelity/Employee Dishonesty insurance your association is carrying.

It could be either. Sloppiness would explain it, except I do not understand sloppiness alone explaining not paying the grass cutters.

Very small association - you have to put effort into finding a smaller association. No fixed assets, ~3 accounting transactions per month, no common grounds nor any hard assets - only money, no or little enforcement of deed restrictions, 56 total lots many double owned so less than 50 members and 1 annual meeting and 2 board meetings in a year. In case you are wondering why the association would employ grass cutters when it owns no property - there are 3 subdivision entrances that are on private lots of those members but the landscaping on those entrances is maintained by the association. Also the association occasionally cuts grass along a highway right of way that fronts the subdivision.

Point on size - everyone knows everyone and the grass cutters also do work for a few of the members which is why I say hearsay on that - one of the members who hires them for her own residence said the grass cutter is complaining to him that the association is refusing to pay him and he said the grass cutter who does the frontage has said the same. Also, this is why I opine that not paying grass cutters would not be explained by sloppiness to me because the person would know, or I assume a rational person would assume, those grass cutters would tell some of their other customers who are in the subdivision. Plus one of them does work for the Treasurer. Instead a lack of money would explain it more.

The Treasurer is involved in a civil lawsuit with another member. She and the other directors tried to use the D&O insurance for here, even though it is not an association lawsuit - a judge even stated that to the Treasurer's private attorney in a hearing. This is not hearsay I was in attendance at the hearing where the district judge interrupted the Treasurer's attorney to state, "let me stop you there, you are belaboring the situation of the home owners association. It is a highly dysfunctional association. That is without question, but I fail to see how the association has anything to do with this case." He then denied her motion which was the purpose of the hearing. In that motion, the Treasurer's attorney filed a ~330 page brief that mostly was emails and testimony of all the craziness in which our association has been involved over the last few years.

Also, per a court filing, where the Treasurer's attorney was displaying her line item bill to that point, she had numerous line items where she went over the D&O policy, made calls to the carrier - she basically tried to pull on the insurance over a 3 months period. Also during that period the D&O policy was either canceled or expired and the Association went months without a policy.

Earlier in the case, the Treasurer's attorneys bill was ~$36K per her court filing detailing her attorney's charges to that point and there have been many more filings since then, including another 300 page filing by her attorney. If you double that figure, which is possible with all the activity of the case since she disclosed $36K, then that would be roughly how much money the Association has. The Treasurer is in charge of all financial and does all the checks. So the money could have gone there - it is highly possible.

Perhaps the treasurer is paying it with her own money, but I know here electricity was turned off for non-payment a year or two ago, and per court records she is no stranger to the legal system with a multitude of suits by creditors and a track record of dodging processors - in one serving record, she raced out of her house into her car, driving across her yard where the processor wrote, "I think they were trying to avoid me." So I am not sure where odds are going.

Do you have a friend at the police department for an informal discussion?

I am still unclear of how your HOA is set up to pay bills? Provide more details?

I do not know if it is by check or wire, but I am near certain that only the treasurer is involved. Based on how the other two directors operate, what has been done in the past and the situation that after the treasurer left the annual meeting, no other directors gave the treasurer report, they just did not have one, I would think it is near certain.

Why is it that people minds automatically go to 'illegal' in a HOA. Do you know the definition of embezzlement? A HOA is a non profit corporation but charitable one. It is to spend as much as it collects.

We do not have enough information about how the HOA is run. Is there a PM? Is it owner owned? Who receives the bills? What bank are checks written from?

It seems more caught up in this lawsuit stuff than actual operations of your HOA. You have the right to request records in writing to the board. That could shed light on real things than rumors or thought.

The answer is to simply get organized and persuade others to do something.....

Start a facebook group, email list or similar. Let other homeowners know what's going on and how their biggest asset, their home is at risk. Vote other people in as officers, treasurers, etc.

Lawn care….. most hoa have a sign at the entrance on grass that is common area. And lawncare would be needed for that. in theory a homeowner could drag his lawnmower to the common area and mow it every week, but in real life, that isn’t happening. so you pay a company to do it

I agree. But Roger said upthread:

" In case you are wondering why the association would employ grass cutters when it owns no property - there are 3 subdivision entrances that are on private lots of those members but the landscaping on those entrances is maintained by the association. Also the association occasionally cuts grass along a highway right of way that fronts the subdivision. "

That's why I questioned it, since it's outside the norms that I'm used to. Either the Lovely Landscaping is on common area, or the association has an easement of some sort. Both of these things should be defined in the CC&Rs.

If the bills aren't being paid by the HOA, maybe at some point the owners of the lots paid them? But that could raise issues of a different sort.