Board use of HOA funds for Year End Dinner

Started by LucyS2 • 17 replies • 3636 views

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LucyS2 (Arizona)
Posts: 7

Posted:

Anyone have information on any Arizona statute prohibiting certain expenditures out of HOA funds. As a new newly elected Board Member, who has replaced a long-term Board Member and President (10 years or so); in going over the 2009 financials have found the previous Board has spent HOA funds for dining out on several occasions. In discussing this matter with friends and board members of other area HOA's, I've been told there is an Arizona statute prohibiting board members from benefiting in any way be it gifts, dinners, etc. purchased with HOA funds. I have researched and found nothing specifically speaking to this situation. Any information would be greatly appreciated.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Lucy,
This is a old, old story that comes up every once in a while and it gets beat to death until in crawls back under the porch and goes to sleep for a while. There are new posters I expect that have some feelings about it, but it never is resolved here. IF they are covenants or laws against it for an individual association, don't do it. If there are no laws or legal guidance for a particular association and it has never been done...............why do it? But if you want to get practical and feel a members Bar B que is a plus, then do it. There may be associations that have special circumstances and many allow for reimbursement of travel or expenses to make a meeting, then do that.

Bottom line is if it is clearly illegal, don't do it or continue it, Otherwise, if you must do it, don't hide it and publish the costs involved as a separate item..........all the costs. We have done a members dinner for years, this year we are not going to, just a bring your own snacks and drinks for a social gathering and the morning of annual meeting serve danish, coffee, blah, blah. I like this year better. There are other opinions.

Regarding what you have been told, our AZ expert will post on I am sure and give you AZ law. We have a member that every Board meeting makes coffee and homemade cookies and also cleans up after meeting. Don't expect that to happen at all Board meetings for any number of reasons. I feel there is more reasons not to provide dinners or expenses or any other monetary produced rewards to Board Members, or any other members, than there is to provide them. It can easily get out of hand and cause problems.........as you discovering there was funds spent that were not transparent, if that is what you said. A minimal amount I have no problem with....that is just how I feel. If it goes beyond coffee and cake............it bothers me.
Not all feel the same.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Lucy,

There is no such HOA statute. The next time someone tells you there is just ask them to tell you the statute number.

Review your CCRs for info regarding what assn assessments can be used for. In my CCRs that particular clause is titled "Use of association funds" and gives the BOD the authority to use the assessments for ". . .any uses of whatsoever kind or nature, and whether within or without the property as the board may in its sole discretion deem necessary desirable or beneficial for the interests of the property, the owners or the residents or as otherwise authorized of required herein." Some CCRs may be more limiting. The only "law" you must adhere to is what is written in your gov docs.

LucyS2 (Arizona)
Posts: 7

Posted:

To Clarify: Needless to say HOA funds are used for refreshments such as veggies, crackers, dips, water, etc. for annual meetings. We occasionally have some such spring, summer or Halloween community function that is pot luck with the Board providing cookies and non-alcoholic beverages at these functions. I see no problem with that as these are community events. What I'm asking about is several expenditures (in the $400 range)to dine out for the Board and Property Manager (6 people). We are a small community of 132 units that has been hit hard by the downturn in RE market, foreclosures, short sells and people just walking away from their properties. As a result, we are $18,000 + in arrears at this time in collecting monthly dues and are facing a large assessment due to the repairs of our roads being "patched" several times instead of paved has been put off since 2004. Our CC&Rs state generally that funds are to be used for the upkeep, benefit and improvement of the entire community. Since State laws trump individual Assn. documents, I was hoping to have some ammo should this type of expenditure be proposed again since three of the five board members involved are still seated.

RogerB (Colorado)
Posts: 5,067

Posted:

Lucy, I defer to Mary's advice since she live in AZ. Some Bylaws have a clause like: "No director shall receive compensation for any service rendered to the Association. However, any director may be reimbursed for actual expenses incurred in the performance of the director's duties." If your's restrict compensation I think limited funds for meals during Board meetings could be considered an acceptable reimbursable item. Particularly when this expense would secure a meeting location rather than having to pay for a meeting location.

Some questions for you:
1. Are you a member of the Board?
2. Are you an active supporter of your HOA - serving on committees or the Board now or have served in the past?
3. Does your association have no problem getting members to serve?
4. If you answered "no" to the above 3 questions you might consider getting involved to gain perspective. After gaining sufficient perspective you could try to change policies with which you do not agree.

JonD1
Posts: 2,350

Posted:

I would like to know what amount of money are we discussing?

Did 6 people go out for dinner and spend $400 and if so how many times and for what reasons?

Will the amount of money involved make a drastic difference to the financial status of your property?

One of the first things I did as President was to institute an annual dinner for the members of the Board, the office staff at the management company (2) and a few select contractors who go above and beyond in serving our property.

Most serving on the Board never met face to face with these folks who worked each day to serve their property. I had hoped this would help the Board form some sort of bond rather than just a realtionship as members of the same Board.

These are the same Board memebrs who attend at least 13 meetings per year. Work to maintain, improve and protect YOUR property year round. Over my years of service I along with various other members of the Board have saved our property 10s of thousands of dollars and more.

IMO to spend $20 or so per person for a meal once each year was a simple and inadequate way of saying thanks to those who both served on the Board and those who answer the day to day challenges our property faces.

Reading some of the posts on this site and meeting firsthand some Board members from other properties I understand the difficulity in finding good people willing to give of their time and I have seen first hand the affects of having people in these positions who have failed to do their jobs at even a minimal level. If this annual dinner can serve as a "token" gesture of thanks to those who protect your homes and investments ( especially in these trying times) I am all for it. Without THEIR efforts OUR property would not be where we are today. Perhaps this might also be true on your property.

For most serving on the Board is a thankless,unappreciated task maybe this might be beneficial to your property in the long run. It certainly can't hurt not for the minimal amount of money we are talking about in the big picture.

LucyS2 (Arizona)
Posts: 7

Posted:

Roger B,
1. Yes I am a newly elected Board Member - Secretary.
2. I have been active on the Landscape Committee for years and continue to be active on this Committee. It was because of some new Rules and Regs passed by the previous Board that I and another homeowner decided to run. The new Rules regarding severe landscape restrictions on our private patios were the catalyst, if you will. As so many HOA's experience, the many let the few take care of everything (I've found that is true of any volunteer work). We, as a community, became apathetic and the Boards (same people serving year after year) went on a continually escalating "power trip" that needed to be curtailed.
3. No one wants to serve; and, as a matter of fact there are quite a few people who "fear" the retaliatory behavior of long time residents who have been holding the board positions until myself and another homeowner actively campaigned and unseated two of the long time members.
4. I fully understand our community did not get into the shape it is in overnight and will take some time to "fix" all that has been allowed to go wrong. In the three remaining board members, we are up against some archaic thinking, no business sense and no forward planning. The other new board member - Treasurer, and I know we have our work cut out for us and are willing to work to facilitate changes in a deliberage manner so as not to turn everyone off by being a "ramrod". The previous Board was more interested in sending out violation letters for the most picayune things against those who disagreed with them than maintaining the HOA's responsibilities to set the standard for the community. I was viewing the previous Board's treating themselves to dinners out (not to secure a meeting place) as an "entitlement" for their service. However, if you expect payment for volunteer work -- you shouldn't be volunteering and you shouldn't be using HOA funds as a "thank you". Thanks for listening.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Lucy, Mary pasted what the documents state and she is also AZ. It appears the sky is the limit if the board decrees. This question never gets resolved here and the next part of it will be to try and define "the appearance of misconduct, or should this item be budgeted, and can you change the documents. I would assume you can with proper procedures, but I doubt you can get a count of the nays and yeas here, there is too many if's and but's.

My opinion.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Lucy,
What happened to your latest post? I got the e-mail message and when I come here, it is gone.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Lucy,
Now your reply is there...........spooks...I guess.
I suspect this is not your first foray into the management of HOA life. I am referring to taking on issues you find suspect or unclear or whatever. You logic seems sound and your concerns ligetimate to me. However I don't know that this is the time and place for you to fight that battle. I suggest you put this on the back burner and as you slowly make changes and replace people you will get to the spot that making these amendment changes the membership desires is a routine procedure and no feathers are ruffled.
As you know you are in this for the long haul so make haste slowly.

As a board member you can demonstrate your disagreement by not attending the dinner.

LucyS2 (Arizona)
Posts: 7

Posted:

This actually is my first experience living within an HOA and serving on the board. However as a professional, I've dealt with all types of personalities and situations in the corporate world so in that sense I'm not a "greenhorn". After reading the responses, I've decided my energy must be directed toward the big picture going forward. However, if I find anything else amiss, I surely will revisit these figures. "Making haste slowly" will be my second mantra after "communicate and educate" the community. Thanks for your advice.

LucyS2 (Arizona)
Posts: 7

Posted:

Mary, I did ask for the statute # and they were not able to give it to me. I believe at this point, their HOA's most likely have a long standing "no gifts, no thank you dinners, etc." protocol within their operation that is deeply ingrained. As ususal, CC&Rs can be interpretational, and the previous Board felt they were due a holiday dinner or two. As I've mentioned in another reply this situation will take a back seat to more pressing items unless I find any more "food for thought". Thanks for your advice.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Mary,
Where did the language of what is in your CC&r come from. I know you said there was no statute concerning this issue but is there any other place this is addressed that you know about, such as non-profits for your state?

We sort of treat this as a Board rule or decision that is established when the annual meeting is planned and influenced by the general condition and mode of the Board. We do have a stipulation that is similar to many the the Board can be reimbursed for travel and expenses. It does not extend to anyone outside the organization that I can determine. I really expect most HOA's and condo's are influenced strongly on this issue by other conditions, such as budget, type of complex, where located, all kinds of other considerations, real or imagined. Over twenty years our boards have done pretty well as far as I know, and all Boards have shown restraint in this regard.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Robert,

There is no AZ HOA statute or nonprofit corp statute that addresses this issue. Board members who feel they "deserve" to be treated to dinner by the assn should be kicked out of office. Holding a board position in an HOA is a voluntary act and anyone who holds such a position with the thought that they should be thanked, compensated, treated, etc. is not holding that position for the right reasons. My board does not "treat" themselves nor our manager to dinners out. Just my opinion of course! I and my husband both are former board members and I currently serve on the advisory board of my HOA and am chairman of our grant committee.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Lucy,

I'm not surprised they were unable to quote the statute number as there isn't one! As a new board member about all you can do is voice your objections to this policy and refuse to attend any dinners being "hosted" by the assn. Considering the financial problems being created in your HOA because of foreclosures, IMO, this would be one line item that could very easily be deleted. In its place include a line item for "bad debts" using the funds that are normally spent on these dinners. It would be a start in the right direction. See how that idea flies by your fellow board members.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Mary,
I think that cuts through to the quick rather well, and expresses my sentiment. I can't imagine that the fact you got a free dinner would entice anyone to be a Board Member. All you need to want; to be a Board member, is to desire someone yelling at you, work hard and spend untold hours busting your hump for someone else, and be devoid of any desire to have someone tell you "Good job". Sounds like enticement enough.

LucyS2 (Arizona)
Posts: 7

Posted:

Mary, thank you for validating my thoughts and feelings about people volunteering for the right reasons. I refuse to give up my ideals of what is right and what is fair. I've been accused of trying to fit my ideals of a "perfect world" into an imperfect scenario. However, in most cases, what is right and what is fair just takes a lot more hard work and energy than taking the path of least resistance.

Thanks again, your suggestions are well taken.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Lucy,

I've often said HOAs are not the "perfect world" but that certainly doesn't mean they can't be managed properly and that BODs cannot always act in the best interests of the assn.

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