I have a rental condo and have owned the unit since Jan 19. This complex has 18 units that pay $175 per month. Board members do not pay HOA dues as this is their compensation. The board consists of 3 unit owners and they manage the HOA 100%.

The complex seems very relaxed and not one person seems to really have any interest in questioning them but some things very shady. The reserve balance has been steady at around 30K for the past 7 years. My brother in law owns a unit and has been there the past 7 years. Expenses are very minimal as there is not much besides landscaping, insurance, snow removal in the winter, and other very minimal expenses. With the HOA collecting $31,500 a year where is this money going to??

Yesterday I request financial statements and records of the bookkeeping for the past 3 years. One of the board members was very taken back and from his emails seems to appear nervous and stalling.

My question is how long do I give them to turn over the books for review. If there are skimming, what should be done on my end? Any advice would be helpful.

@Josh Miller , I live in a coop (196 units, much larger than yours) and our books are audited by an outside accounting firm each year. I assumed that was SOP, but maybe just with larger complexes.

I'd expect those books ASAP. They should be readily available and at very least annual statements distributed to the owners.

The fact that board members don't pay HOA sounds fishy.

That being said, there may not be anything illegal going on, they're just disorganized and not really on top of things. Now you're asking questions.

Yes, they are innocent until proven guilty. But if I was a betting man, I would say guilty. Its very fishy, I will give them till Friday and request again if I do not hear from them.

Please update us when you find out

Following.

About a month ago an entity that my wife is on the board found out that over $100K had been embezzled by the only person that could have done it (the exiting treasurer).  The exiting Treasurer was a successful male with a successful wife living in a multi-million dollar home (Zillow has it at $2.8M).  He was a CFO at another company (unbeknownst to the board my wife is on, he was no longer CFO since Spring - not sure if fired or laid off).

In hindsight there were 2 indicators (one of which happened a few times).  Of course, hindsight is 20/20.

1) He had some casino charges (I think it was 3 times) on the board debit card.  He indicated he had "accidentally" pulled the wrong card from his wallet.  This would make more sense if it was a credit card but he had to pull the wrong card from his wallet and use the pin associated with the wrong card.  Seems that if he pulled the wrong card from his wallet it would be obvious when he used the PIN.  He paid this money back and the board believed his story.

2) The incoming treasurer kept having issues getting together for the handoff in duties.  There was always an excuse.  Out of town that week.  Company in town that week.  Big deadline at work.  Etc.

The incoming treasure on the handoff started recording audio on her phone as soon as things seemed amiss.  The outgoing treasure had issues logging in, etc.  The incoming treasure recorded the entire thing and got a confession on the spot.

The man had an obvious gambling problem.  His wife was unaware that he was unemployed and the extent of any gambling problem.  He had cleaned out their bank and investment accounts again unbeknownst to the wife.

Fortunately, he did not want to go to jail and had a lot of equity in their home and had friends/family that would help him out.  So the money is either already fully recouped or soon to be fully recoupled.

The outgoing treasurer seemed like he could be trusted.  He was successful.  His wife is successful.  He has a gambling problem that he cannot control.  The person the board reports to (being vague on purpose) has experienced this 3 times.  I would have never guessed.

Good luck

Board member not paying HOA is unheard of. Being an HOA member is usually voluntary and for the overall good of everyone's investment. The HOA books should be readily available to any owner at anytime. When you get your year end statement for tax deductions from the HOA doesn't it come with a numbers tally. showing expenses, reserves, future repairs?...Doesn't the board have a third party CPA doing the books?

@Josh Miller I was a licensed HOA manager for 6+ years and Treasurer on another (where I proved theft by the President). You need to look at your HOA documents. What do they say regarding reviewing financials? Do they provide for board members to serve without payment? (not a common practice and probably frowned on by the IRS) At minimum a small HOA is generally required to produce annual balance sheets and profit and loss statements for every member. They have to file taxes too - do they have an accountant? In answer to @Jaysen Medhurst - true audits are quite expensive and smaller HOAs would not do this. But there should be a check and balance system in place where two signatures are required on all checks. Boards have a fiduciary duty to the membership and sometimes need to be reminded of this. They are not protected if they put their own interests first... 

@Anthony Rosa @Teri S.

The condo docs stats board members may receive compensation for the position. However, yes, a no HOA fee is strange and i do believe the IRS would have an issue with this. When I requested the financials the secretary quickly responded asking why am I requesting them. When I replied I would like to review them because I am a new owner for just under a year and would like to review them annually. He responded "I'm not looking for a fight" very bizarre and to me comes across as he's hiding something. He also mentioned in the same email that the treasurer's father died and he would need time to get the 2019 books organized. I replied, not an issue in the meantime please send me 2017 and 2018. I have yet to hear back from him and this was Tuesday. Of course I said I think you took my email out of context, I am merely asking for a simple request that in common in any HOA.

They seem to appear very guilty. My guess is they are not going to turn over financials and I will have to file a complaint with the state. If I don't have them by Friday I am going to send another email and possibly state I will not be paying any further HOA dues until I see the financials. Not sure if that's legal either though.

@Josh Miller doesn't sound promising... and a cleaner way to handle the books would be for the board members to pay their dues and then get a check written back to them for their services. More transparent... Have you talked to other owners? Anyone on the same page as you? 

@Teri S. my brother in law is also a unit owner. He lives there, I rent mine out. He is the one that mentioned to be that they appear shady. He has owned his unit for 7 or 8 years and he isn't as direct as I am so he has always been nervous to question them for some reason. Overall, the other condo owners seem to just keep to themselves. Its a very quite complex.

The trouble is if I cant get the books, there's no way I could get them to change how they are getting paid.

Originally posted by @Josh Miller :

@Anthony Rosa @Teri S.

The condo docs stats board members may receive compensation for the position. However, yes, a no HOA fee is strange and i do believe the IRS would have an issue with this. When I requested the financials the secretary quickly responded asking why am I requesting them. When I replied I would like to review them because I am a new owner for just under a year and would like to review them annually. He responded "I'm not looking for a fight" very bizarre and to me comes across as he's hiding something. He also mentioned in the same email that the treasurer's father died and he would need time to get the 2019 books organized. I replied, not an issue in the meantime please send me 2017 and 2018. I have yet to hear back from him and this was Tuesday. Of course I said I think you took my email out of context, I am merely asking for a simple request that in common in any HOA.

They seem to appear very guilty. My guess is they are not going to turn over financials and I will have to file a complaint with the state. If I don't have them by Friday I am going to send another email and possibly state I will not be paying any further HOA dues until I see the financials. Not sure if that's legal either though.

Every member should see the books. Did you look at the books before you bought the property to see their financials and reserves? What about new owners, they should get a copy. 

Don't banks request to look at the financials of HOA or management companies? My lender and attorney wanted to see the financials before moving forward on the sale of a co-op apartment.

@Anthony Rosa This was a foreclosure that I paid cash for. 

They send a BS budget excel sheet yearly to each unit owner. I knew it looked shady when I made the purchase, however the cash flow is great and my return is 19%. With that said, its a great property with a great tenant. Only issue is the HOA

@Josh Miller , I'd start memorializing all of this in communications with your lawyer. Contemporaneous notes will go a long way should this turn South. Your lawyer will also be able to advise when it's time to get the authorities involved.

@Josh Miller your HOA docs will also spell out how and when elections are held. Perhaps a change of board is advised - many times, no one runs for office when things appear "smooth". Sounds like they have it pretty cushy - free dues, no accountability, etc. Run for office and find others to join you.

@Jaysen Medhurst

This is an excellent advice. Loop in your attorney and keep them up to date with all communication.

This will help you in long run.

Good luck and keep us informed.

We owned a place in Park City Utah which to this day,  I don't know what happened.  Crazy special assessments,  many times the work didn't happen.  Demanding the building maintenance guy have a key to everyone's unit,  (fire hazard supposedly),  he was caught walking in on women at least twice that I know of.   (Turned out this guy raped a teenager when in his 30's).  Was second home for many of us,  a lot were elderly,  just not on top of things.  And I was naive.  I ran against her and lost (dirty tricks on her part) by 55-45%. (For example,  she told people that only Utah residents could be on the board,  lies like that.) We sold the unit because she threatened my tenants.   Three years later she was ousted.  The day before the election, she wrote checks of $50K each to the maintenance guy, the accountant, and the lawyer.  I'm told legally nothing could be done because she was in power when she did it.  Maintenance guy was fired at same meeting,  everyone had locks changed the next day.  Next day accountant "had a small fire in his office"  that seems to have burned up only the records for that association.   And less than 60 units have to make up the $150K....plus catch up maintenance, plus wonder forever WTF happened.  If there was ever a person I'd like to murder, it's that ***** of an association president.

Originally posted by @Josh Miller :

@Anthony Rosa @Teri S.

The condo docs stats board members may receive compensation for the position. However, yes, a no HOA fee is strange and i do believe the IRS would have an issue with this. When I requested the financials the secretary quickly responded asking why am I requesting them. When I replied I would like to review them because I am a new owner for just under a year and would like to review them annually. He responded "I'm not looking for a fight" very bizarre and to me comes across as he's hiding something. He also mentioned in the same email that the treasurer's father died and he would need time to get the 2019 books organized. I replied, not an issue in the meantime please send me 2017 and 2018. I have yet to hear back from him and this was Tuesday. Of course I said I think you took my email out of context, I am merely asking for a simple request that in common in any HOA.

They seem to appear very guilty. My guess is they are not going to turn over financials and I will have to file a complaint with the state. If I don't have them by Friday I am going to send another email and possibly state I will not be paying any further HOA dues until I see the financials. Not sure if that's legal either though.

>He also mentioned in the same email that the treasurer's father died and he would need time to get the 2019 books organized. 

My earlier post noted as the second indicator of a problem with the finances my wife was a board member (not an HOA BTW) was the treasurer was too busy for the handoff (for 4 months). With my wife having gone through this in the last month, I may be paranoid but I fear you are correct that something is amiss.

The board my wife is on was full of knowledgeable people (2 Attorneys, CFO, CEO, etc.). They were very qualified to deal with an embezzlement (and they did a virtual perfect job, especially the incoming treasurer) and their issue was much larger than an HOA (it had literally tens of thousands of people with an outside interest).

The board my wife was on was very qualified.  They found our Sunday.  By Tuesday night they were reporting to their upper (vague on purpose) and everything was already done.

If you are not qualified to deal with an embezzlement, get the necessary help.  There are a lot of things to do such as lock financial accounts, police report, look into insurance coverage (embezzlement insurance is an extra fee and is not always included), in the case of my wife's board they brought down the web presence for 2 days, changing of passwords, etc.  IT was needed in her case more than would seem obvious.  

Good luck

Damn! There is a lot of fishy stuff going on here. Start rounding up fellow owners and get ready for a fight. I’d try to convince everyone to split the cost of a lawyer and start figuring out your options.

In all states I know of, it’s mandatory that they have a third party audit every year.