Board Expenditure not approved
The social committee held an Easter Event. Although funds were included in the yearly budget for social activities, the specific amount the committee could spend for the Easter event was not approved by the Board prior to the event. The way in which I discovered this information is because it was included in the draft minutes of the Board Meeting which took place a week or so before the event took place. The draft minutes indicate the committee will provide the cost of the Easter event at the next meeting. It is my opinion the Board should have approved the expenditure amt for this event prior to the event. Is the manner this was handled by the Board acceptable or should the expenditures for this event been approved by the Board prior to the event?
About Post Author
5 Responses
Leave a Reply
You must be logged in to post a comment.
I await a reply from Dennis with interest. Our HOA increased the party budget from $2000 to $10,000. We just voted a CPA on to our Board and he accepted the position as treasurer. A subset of homeowners are questioning the secular spending on Christian events Easter and Christmas. Are these legitimate corporate liabilities and if so, are the expenses gifts, entertainment or business meals? We calculated our HOA is spending >$25 annually in gifts to residents, including tenants who are not owners. Our bylaws say only directors can contract for goods and services and for facilities and legal needs of the HOA. There is nothing about parties. Previous post here indicated an HOA justified egg hunt saying expenses were justified because they provided wellness and recreation. I’m Jewish, so am tired of paying for Christian parties in the hood. Thank you for being now the 3rd homeowner to question egg hunts as a legitimate HOA expense.
Lora,
No state statute addresses this issue, so the community documents dictate. Here the language in the CC&R are most critical. I will say that many associations do provide for social activities with association funds but typically they must be geared for the benefit of the entire community. While I fully understand and appreciate your concern relative to religious based events, the most that you can do under current law is simply present your concern as a group to the board. You are free to participate or not participate in these events as you desire, but because you do not participate does not mean that you should not have to pay for those events as common expenses. The same way that if your association has tennis courts and you do not pay tennis the cost to maintain those facilities are common expenses that everyone has to pay into whether you use them or not. So the key to your answer has to be in the exact language of your governing documents.
As for the second part of your question relative to gifts. Most association have language in the Articles of Incorporation that specifically preclude any association funds to inure to benefit of any individual. This language would make gifts to any individual illegal.
Dennis
Kathy,
In general, the board of directors must approve any expenditure of association fund prior to incurring the expense. Even if the expense is carried as a line item on the budget. The budget is a plan for expense management and not authorization for that expenditure. Anything other than routine repetitive cost such as landscaping services or management services must be individually authorized by the board. What the board should have done if detailed expense projections were not available, was to approve the expenditure of a not to exceed amount for the event.
Dennis
Thanks Dennis. The other concern I have about this event is that there is not one mention about it in the minutes with the exception of the draft minutes for the meeting that took place right before the event. The draft minutes indicate the committee will provide the cost of the event at the next meeting which is in June. That’s the only mention of the event in the minutes. If you ask me the Board is not upholding it’s fiduciary responsibilities and the manner in which this event was sanctioned by the Board is not proper.
Kathy,
From what you have described I would agree with your assessment. I believe that the best way to address your concern is to attend the next board meeting and voice your concern with the lack of formality in reviewing and approving association expenditures. This is not the board’s money it is the associations money and the association of homeowners who supply all the funds to be used by the board deserve that formality by the board for every single expenditure of the association.
Dennis