A couple started a business and, in the process, hired a secretary | bookkeeper.
As the business grew he essentially handled the business side of things while the couple focused their time on growing the business.
Later a degreed officer was hired to handle financial matters.
She discovered that the employee, who the owners had treated like their own son, had used their credit cards for personal use. I won’t go into detail but there was serious misuse of the credit card and it had gone on for quite a while.
The owners were devastated and, as a result, new accounting measures were created. Nobody blamed the owners, a friend had exploited their trust.
The above situation is very similar to what Spanish Cove is experiencing now. The people who misused the credit cards hurt Spanish Cove and the trust that POASCs officers and residents placed in them.
The Board of Directors didn’t take advantage of Spanish Cove it was the people they hired and trusted to manage POASC for them that did.
Tags: accounting, Exploitation, Regulations, rules, Trust
there are many “snowbirds” in the Cove. It simply alerts everyone to our non-permanent status. I see it as a courtesy?
Mr. Junkins: I inadvertently left out a few words in the last sentence of my last posting. It sould have read “Likewise if there were/are questionable purchases” (the treasurer should report this in a timely way). I didn’t mean for it to come across like an accusation, but I do believe that the legislator’s (i.e. the board of director’s) owe to to the resident’s of Spanish Cove to see that day to day operations not be politicized…or that it’s kept to a minimum. If a previous treasure signs off on something that a new treasure doesn’t agree with that, in no way, is an operational failure.
Question: regardless of the way I was treated as an employee, Do I have a “dog in this fight” if it turns out that I’m a prospective property buyer?
And I hope your recovery goes as well as your surgery apparently did!
Well, I just returned from the hospital with a full knee replacement and I see where someone is using my handle of “snowbird”. I truly believe that until this blog requires registration this could happen to anyone.Blogs are wide open to this type of mischief. Hopefully, things well for you folks.
Add POASC previous Operations Manager to the list: Bernie Madoff, Tiger Woods, etc, etc.
Dave: Not to be nitpicky (though I’m going to be anyway), but this is the actual wording from the Operating Procedures (Section 3.1):
“2. Expenses of a non-recurring nature which do not exceed $500.00 per item or service, do not require specific notification or approval. A non-budgeted item which has not occurred in the previous six (6) months and is not anticipated to reoccur in the next ensuing six (6) months.
3. Expenses of a non-recurring nature which exceed $500.00 but not above $1,500.00, if funded in the current budget, may be authorized immediately, but the Board of Directors shall be notified at the next scheduled working session of the specific expenditure.
4. Expenses required for extraordinary repairs or replacement of POASC assets due to emergency or natural disaster, regardless of the funding levels or if an unfunded category, may be committed or approved but must be reported to the Chairman of the Board of Directors and the Chairman of the Finance Committee within twenty-four (24) hours.”
However, even though it’s a little different than what you recalled; as we all can see, the authority is very broad. When that much authority is given, it’s all the more important to have a good record-keeping and internal control procedure to ensure that authority is not abused.
Jim: I appreciate your thoughts and questions, but not accusation or innuendo. There are enough people throwing that stuff around already. I realize you’re a concerned former employee, but you’re not a Spanish Cove property owner, and you really don’t have a dog in this fight.
I had no problem tring to provide information on your previous questions, but your references to “theft” and “questionable purchases”, when you’re not even in a position to know the facts, makes me less willing to be forthcoming with you.
Beth, our rules give the manager the authority to spend up to $500 as he/she desires and up to $1500 with the permission of the Chairperson. All the checks paying the credit card purchases were signed by the Board Chairperson as was the one for the purchase of the computer. As a result, although there was misuse of funds in my opinion there could not be a conviction for a crime. Understand, I do not condone what was done in any manner. It stinks to say the least. It should also be noted that the Board has filed a criminal complaint against Charlie and the Police are currently investigating the matter. Their findings will determine whether it matter will go to the District Attorney and subsequently to trial. Nothing you, I, or anyone else says will make it a crime or not.
If a credit card theft is committed it should be the SC treasurer’s job to report the problem in a timely way. Likewise there were/are questionable purchases.
How can anyone say that No Crime Was Committed???
Mary, forgive me, but I can not understand what you are trying to say. Are you accusing a member of the Current Board of having committed lack of oversight or are you saying that the oversight occurred under previous Boards? I, personally, do not see how blame for the misuse of funds can be placed on the current Board. Mrs Fletcher became Chairperson only several months ago. Mr Bonnet was elected to the Board and became Treasurer in April of this year. Mrs Huff, although having the title of Treasurer during some of the time in which the misuse occurred was not an approved signer of checks and never saw one of the bills in question. It is obvious something went wrong Checks were drawn that should not have been and were signed paying bills that should not have been paid. But, you can not fairly blame people who were not in position to prevent it for committing oversight. Blame should be placed where the blame falls. COPOC blames the board for not giving out information that any attorney would tell you could only result in a slander or defamation of character award. Believe it or not, NO CRIME WAS COMMITTED. I find it interesting that COPOC gives out information through “solicitation” not permitted under our Solicitation Rules ( The literature was “signed” by a person who is not a POASC mmember, and one who was behind in assessments when the document was distributed, Both of these people were not even residents of Spanish Cove when the misuse occurred.) that contains half truths and innuendos. Why do they blame the current Board and not put the blame where it belongs? The reason is obvious, if they were to name the individuals who signed the checks they would have to defend themselves against a slander and defamation of character suit. The same suit they want the Board to expose POASC and every member to. I think it is time to start calling a spade a spade. Better yet, lets support the Board in their efforts to close the loopholes in our procedures. To his credit, one COPOC member has asked to serve, and was included, on the AD HOC committee working on just this project.
FIDUCIARY RESPONSIBILITIES OF THE BOARD
The Board has a fiduciary responsibility of acting both with loyalty and DUE CARE for the best interests of the corporation. If the Board breaches the fiduciary duty of loyalty and/of care, and financial damages occur as a result, a legal cause of action can be brought to the Board. A Board is liable for any damanges caused by a breach of fiduciary duty.
If a board member or members cannot publicly defend his lack of oversight and lack of care protecting the assets of the corporation, the Board when it comes under attack should question that board member or members service immediately.
When a person accepts a position on the Board, that person has accepted certain responsibilities including the constituency – the homeowners.
I couldn’t believe my eyes when I opened my Elberta-Lillian Ledger this morning and there on the front page above the fold was a story about Spanish Cove money management. What on earth does CPOC think they will accomplish by announcing to the community that we have had a problem with an employee betraying our trust? Oh, I’ll bet that story will sell a lot of houses! Yes, unfortunately we had a problem. Yes, mistakes were made. “Let he who is without mistakes cast the first stone.” The board and management are establishing new controls so it won’t happen again. Will it happen again? Hopefully not, but people are people and if someone is intent on doing bad things, they will probably be able to find a way that no one else has thought of. So we do our best to plug the holes and move on.
But let’s look at the bright side. Our amenities are in good condition. Our bills are being paid. Our reserve accounts, although not as large as some would like, are in good shape and adequate to replace or repair major assets. Income and expense statements are provided to the board and property owners each month. Good people are volunteering on committees and other activities all the time. Spanish Cove is still the best place to live in LA. Why would anyone want to tell others that it isn’t?
Thanks, Sally. I neglected to respond to that one.
I’m wondering what point you’re trying to get to here, Mary M.
Mary M., I suggest you read Robert’s Rules regarding Executive Sessions. Our ByLaws determine when an Executive Meeting may be called and our Operating Procedures describe how one may be called and how the minutes are to be handled.
Mary M : Where are you getting this info from? Although the duties and responsibilities you list seem logical and are probably used somewhere else, the POASC Operating Procedures are the source for that information here. It’s not that our job descriptions couldn’t use dome tuning up, it’s just that what you’re posting doesn’t necessarily apply here.
You can find those Operating Procedures posted right here on Cove Connections. The information starts on page 16.
BOOKKEEPER DUTIES/RESPONSIBILITIES
The bookkeeper keeps a complete and systematic set of books covering all the financial transactions of the Association. She/He makes the individual entries relating to charges, receipts and disbursements for all the departments; maintains the General Ledger for charges and receipts; supplies data; and assists the accountant with reports and statements.
Responsibilities include:
* Checking all cash in the system daily and checking all cash payments, receipts and charges and posting them as required.
* Auditing the association’s bills and preparing documentation for payment.
* Maintaining the General Ledger, with the various departments classified, for management view of payments and other entries.
* Preparing financial statements, reports, tax reports, payroll, and time records along with other related reports.
DUTIES/RESPONSIBILITIES OF ASSOCIATION MANAGER
* Cooperating with the Board, working with the appointed committees, furthering the plans and goals of the Association, and implementing policies and operating procedures of the Board.
* Administering Association general business, forecasting association fiscal and personnel needs.
* Attending meetings of the Board making suggestions or recommendations for changes in the Board’s policy within his scope of operations.
* Hiring personnel, making work assignments, reviewing the hiring selections and discharging employees when the need arises.
* Making the necessary personnel or task changes for the successful and efficient operation of the Association.
* Writing directives, preparing manuals, planning work schedules and defining the rules and day-to-day policies for the association employees.
* Developing a sound internal control system to deter employee theft, track inventory and funds, and to provide overall safeguards of all of the associations assets.
The Board should hold the Association Manager responsible for assuring that:
* Nonscheduled or unannounced cash counts of all petty cash and fund acounts are being conducted at least once a month by the Board Treasurer or member of the Finance Committee who does not have daily access to the funds, and irregularities and variances are noted. There should be a periodic updating of the signatures of the fund holders.
* All financial statements and reports are prepared and submitted on time and the information contained herein has been verified as correct.
* A budget has been prepared and submitted to the Board for approval and all efforts are being made to operate within its limits, all variances are noted and verified.
* Non-expendable equipment is inventoried at least annually. In addition, an inventory control system has been installed and is operating in the proper manner.
* Working closely with Activities Department planning events
and keeping good cost control.
Executive Sessions
Executive sessions are designed to keep certain matters confidential, for example, some discussions with the association’s lawyer. But if an outsider, SUCH AS THE ASSOCIATION’S MANAGER IS PRESENT, the confidentiality is destroyed and the Board can be ordered to disclose the contents of those discussions.
The discussion of financials is not an appropriate topic for
executive discussion. Financials are part of the business of the association that the Board is obligated to discuss at an open meeting.
An executive session can not be called on its own because it is not a meeting per se but a session that must be adjourned to
FROM a regularly noticed and convened Board meeting.
Minutes of the Board meeting must contain a general discussion of adjournment to executive session and what occurred during that session.
The purpose of the Finance Committee is to assist the Treasurer with Association financial matters, including the quality, usefulness, and accuracy of day-to-day financial records, annual financial reports, and long term budget matters. When requested, the Financial Committee consults with the Board concerning relevant action items and expenditures and their financial implications.
The responsibility of the Finance Committee is to assist the Treasurer in the following:
* Monitoring of financial accounts for the Association
* Preparation of annual budget proposal to the Board
* Review of, and recommended changes to, annual
Reserve Study
* Other special projects as appropriate
Mary M. you are absolutely correct! You neglected to mention the importance of someone actually serving in that position. During the previous FY, that position was vacant, and there seemed to be no interest in filling it.
?????
Got some cheep places for sale?
Jim: The credit card charges that have been referred to here date back several years. And since we have inadequate documentation to support many charges, we would have no basis for disputing even the more recent charges. The questions surrounding this issue bear less on the validity of the charges shown on statements themselves and more on whether those charges should have been made at all. So that’s one of the biggest fixes in play – documentation, expense approval processes and allocation of expenses to proper accounts within our accounting system.
The treasurer is the custodian of the funds and financial records of the association. When the association has a manager or bookkeeper that actually handles the funds on a daily basis, the treasurer’s duties include overseeing the appropriate people to insure that the financial records and reports are properly kept and maintained. The treasurer does not have to perform the daily record keeping functions of the association when this responsibility is transferred to a manager or bookkeeper, BUT the treasurer will ultimately be responsible for insuring that the financial records of the association have been MAINTAINED PROPERLY in accordance with sound accounting practices. The members of the Board have a fiduciary relationship with the members of the association. This fiduciary relationship imposes obligations of trust and confidence in favor of the corporation AND ITS MEMBERS. It means that board members must exercise due care and diligence when acting for the community.
The fact that an association is a not-for-profit corporation, or that the members of the board are volunteers and not paid, DOES NOT relieve them from the high standards of trust and responsibility that the fiduciary responsibility requires. Board members can not be excused from improper action on the grounds of ignorance or inexperience and liability of board members for NEGLIGENCE AND MISMANAGEMENT exists in favor of the association and the property owners.
Each board member must recognize the fiduciary relationship and the responsibilities that the board has to the association and EACH OF ITS MEMBERS. The board’s duties must be performed with care and responsibility THAT AN ORDINARY PRUDENT PERSON WOULD EXERCISE UNDER SIMILAR CIRCUMSTANCES, AND THE ULTIMATE RESPONSIBILITIES OF THESE UNIQUE POSITIONS CANNOT BE DELEGATED TO A MANAGER, BOOKKEEPER OR OTHER THIRD PARTY.
Sandra: Our CPA has conducted those reviews and made recommendations in the past; however, and for whatever reason, many were not adopted. What our subcommittee will do is develop a Policy Manual that includes those recommendations and others; then develop specific Accounting Procedures that execute those Policies. We won’t be starting from scratch. I have documents from my business that are largely adaptable to POASC, and I’ve begun the conversion process. The subcommittee will take it from there, and we will complete the manuals. Sections will be submitted to our consulting CPA as we go, do he can recommend any changes. When completed we will submit to the Board via the Finance Committee for approval.
While all this is going on, the Operations Manager has been implementing ad hoc procedures to protect against any problems in the immediate future. Credit card control, purchase orders, division of responsibilities to improve internal controls – all are in place and will be further defined and refined as we go along.
I believe our finances are currently in good hands, and I’m confident we can produce a Policy and Procedures Manual that will demonstrate the proper level of financial responsibility for everyone – from Board Member to Corporate Officer to employee – going into the future.
I know there’s been some changes in the credit industry recently, but don’t credit card companies still mail out monthly billing statements to card holders? If there’s a questionable charge were theft is invoved, I understand the customer can notify their creditor and only be on the hook for about $50…or so. correct?
I agree Dick, an internal control process in any business is essential. Normally speaking a CPA, at the request of a business, will review all accounting processes | procedures and establish internal controls that prevent and protect businesses and employees from similar problems.
It’s my understanding that a CPA will review the existing accounting controls and offer recommendations to your sub-committee?
Thanks for taking on such a large project and if there’s anything that I can do to help please let me know.
Thanks for the comment but I’m off to eat ham at the Christmas Party. I’ve got something to say but it’ll have to wait until after my tummy’s full
Yes, Sandra, it appears at this point that trusts were violated. However, money is one of the most powerful solvents known to man; it can dissolve moral fiber. Where money is involved, I agree with what Julia Craig wrote in another part of this blog, it must be Trust but Verify (a Thank You to my hero, Ronald Reagan). That’s why we’re moving forward with an analysis and update of the Cove’s Financial Procedures, with an emphasis on the verification process and Internal Control procedures.
One of the principal duties if the Board of Directors is plainly stated in the Bylaws, Section 3.3:
“(b) To assure accountability of all officers, agents and employees of this Association, and to see that their duties are properly performed.”.
A daunting task, but an absolutely necessary one where a Million dollar annual Budget is involved. And those tasks must be clearly delineated – more so than they have been in the past.
If trust were only enough…