R.H. from Cook County, Illinois writes:
Dear Mister Condo,
I moved into a condo complex two years ago. At that time, the reserves were around $180K. I became the president of the board in January, 2019. I am now looking over financial records from 2015-2018. Our reserves went from $379,104 to 214,345 during that time. In 2015 there is only a record of 2 board meetings (One of them lasted 33 minutes). The reserves lost $110k that one year and the board opted to not increase HOA fees. The treasurer during that entire time was 1 person. He has clearly stated in board meetings he does not understand accounting. Lastly, XX Organization is a permanent member of the board because they own 33 units. Do I have any action I can take against the previous board for their clear failure to manage the building finances properly?
Mister Condo replies:
R.H., yes and no. Congrats on becoming Board President. That is an unusually fast ascent from new owner to Board President in one year’s time so I am guessing there weren’t a lot of folks eager in serving. You may have uncovered why. The good news is that there is always an audit trail from the financial institutions where the funds were kept. A withdrawal from a Reserve Fund is not uncommon, especially if a Reserve Fund item was recently maintained. Reserve Funds typically include roofs, pavement, siding, and many other common elements that wear down over time and will require replacement. Where did the money go? You’re claiming that roughly $165K is gone. Work with the bank to see what was paid. If the money went to a roofing contractor and there is a new roof to show for it, likely no harm, no foul. If the money went to XX Organization with no explanation why, it is likely time to get an attorney for the association and start a lawsuit to get the money back. The Community Association Institute has published a particularly good guide to prevent HOA fraud and embezzlement – https://www.caionline.org/HomeownerLeaders/ResourcesforResidents/Pages/Preventing-Fraud-and-Embezzlement.aspx I sincerely hope you will read it and take steps to prevent any further possible fraud or embezzlement at your association. That’s what a good Board President does! All the best!