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HOA president, treasurer need to review expenses

Q: We had a community manager who was embezzling from the homeowners association with the HOA debit card she was issued. She “lost” many of the receipts and whited-out descriptions of the personal items she purchased for herself (cigarettes, toothpaste, cash-back purchases and ATM withdrawals without accounting where the money went, etc.). Obviously nobody representing the HOA was checking these receipts for 16 months. It was widely considered a failure by our treasurer and president for not checking her purchase receipts.

Who should be verifying the receipts of purchases? Should the president and or treasurer be involved?

Our president was asked recently by a board member if he or the treasurer was auditing the purchases by the manager, and he replied that it wasn’t their job. He said the auditor checked those things. However, an auditor only checks the numbers to see if they are all correct and the purchases were properly logged into the proper expense listings on the financials.

I know you are an HOA manager and I was wondering if anyone from the HOA is verifying the receipts of the purchases you make, and if you think it is the job of the treasurer and president to verify such purchases before they vote to accept the financials from the management company?

Also, our president is running his own show here making many decisions this board member thinks should be put before the full board. For instance, He unilaterally made the decision that our social events chairman could not make purchases for events on her personal credit card and get reimbursed by the HOA. This, plus some other contentious issues resulted in all five committee members resigning.

In the recent case where I sued the HOA for removing me from the board illegally, the president kept this board member completely in the dark as to what was going on, and unilaterally made the decision to forego pursuing me for the legal costs when I lost the case.

In your opinion, is he not required to take these issues before the full board for these important decisions?

A: The signers on the association’s checking accounts should review all expenses before approving them for payment. In the case of credit or debit cards, there should be a receipt to support the charge against the association’s account. It is fairly a standard policy that management companies’ accounting departments would require appropriate receipts in reconciling the charge card statement.

The first sign of trouble would be the missing receipts. The president and/or the treasurer had the responsibility to question the manager. The second sign of trouble would be the withdrawal of cash from the ATM machines.

The whole purpose of having a charge or debit card is to avoid paying expenses with cash. In addition, the management company should have raised a red flag with the board. This kind of oversight would have caught the embezzlement sooner.

The president should not be making unilateral decisions. The board needs to become involved and take action at either their executive meetings or board meetings.

Barbara Holland is an author and educator on real estate management. Questions may be sent to holland744o@gmail.com.

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