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December 14, 2008
MAY AN HOA BOARD OPEN A CREDIT CARD ... WHAT IF THEY TAKE THE STUFF?
Lots of HOAs have credit cards - and they use them to allow board members, maintenance personnel and landscape people, etc to purchase things for the HOA. Some HOAs purchase or pay for cell phone minutes so that Board members can communicate, in HOAs where the Board members do not live on site. A reader recently asked:
"Is it legal for an association to open a business credit card with Home Depot and not disclose it to the homeowners nor get board approval to do it? I just found out that historical data shows credit card receipts for thousands of dollars spent on equipment that the previous board did not hand down to the new board including the information that the credit card existed. Beyond closing the account how do we get all the materials back? There are things that may have been used for HOA business and for work around the complex. We are talking many items that I believe the former board members have in their houses. What can we do about it?
First of all, Boards can open credit cards or purchase phone cards or cell phone minutes for Board members so they can communicate with each other and management, if it is not convenient to meet on site because the board members are scattered. Purchasing a phone card for minutes is a way of controlling expenditures, and requiring disclosure of the phone calling records is sufficient for members to verify calls were made to each other. I do not know to what extent the phone cards or disposable phones allow records of numbers called, but if anyone does, let me know. Certainly, board members who have cell phone service can produce records to verify their calls.
And as for credit cards, there certainly should be a limit on the card. I would say for a small association $1000 or less would seem justified. For a large association, the limit could be higher. If the board reviews the statements each month, it can see where abuse might occur before it gets out of hand.
The same kind of or more controls should exist for the checkbook. There is probably more room for misuse or abuse in having check signing authority, even if limited by Board resolution. Many managers are not given check signing authority; many do not even want it. It would not be that difficult for a manager or board member planning to move to Mexico to write a check that exceeds authority, get it cashed and head out. The banks do not all flag large expenditures, nor do they verify every signature. Collecting from someone in Mexico is harder than someone down the street.
Now, for getting back items purchased "for the association". One option of course is for the board to send someone over to the homes to collect items purchased for HOA (Guido????). If board members say they do not have it, ask for a sworn statement to that effect (perjury is a crime and actionable offense). If they are not willing to sign such a statement, include their name in a complaint (small claims will probably work) to collect "lost" items. Filing a small claims complaint for the amount of damage suffered because of "disappearing HOA items" is one manner of recourse. You can spend more and seek attorney advice, but why do so if the amount is under $5000 (which is the limit for an HOA) or $7500 (which is the limit for an owner)?
[And I was not serious about "Guido" ... I do not want to see any broken knee-caps] ... It is, however, okay to send a party over to the former board members houses to "beg back the equipment" nicely. And it is okay to suggest that if it is not turned over voluntarily, that there might be need to file a small claim against the Board members for the losses. I believe such a claim could be brought by either an owner or the new board.
Posted by Beth Grimm at December 14, 2008 11:19 AM