Story Time...
So let me give you a little story on just one point of ongoing mis-management and lack of concern preserving HOA funds. (Yes.. Mismanagement, when the right way is known, the solution was in sight, and nothing was ever followed through with that is clear mismanagement). Ignorance is not a defense.(ignorantia juris non excusat)
Back in 2017 or so, the board at that time switched the bookkeeping to using QuickBooks internally and tried to clean up some stuff and get everything more organized. It was discovered that the HOA had potentially not filed any tax returns (or reporting required to keep non profit status; now don’t confuse non-profit with tax-exempt, will touch more on that later.) for its existence, let alone for past recent years.
It was suggested (in about 2018-2019)to take the current books and have an accountant take a look, assess and fix anything/file anything needed. AT THAT TIME it was the understanding that the costs associated would be for that, and not hiring the accountant permanently. The books were supposed to be checked/fixed and then the brought back and the treasurer to continue managing in QuickBooks just as before ( Instead of paying an accounting firm ~$2k a year to press a few buttons.)
So by rough calculations, the HOA has spent about $10,000+, when it should have spent about $2,000 TOPS!(not $1,500-2000 a year) The treasurer’s job is to input the payments to the bookkeeping system, input payments, and yearly provide statements and invoices, ITS NOT THAT HARD. Definitely not something that we should be paying an accountant $1500-2000/year for!!! (I cannot get you the exact figures, because if I ask for the invoices back to 2018 (total of 5 pieces of paper) I would just get told we’re asking for too much info and denied access to such records)
So back to the tax return, while the HOA is a non profit (when they actually decide to keep the business status up to date) that does not mean that you do not have to file taxes(Being a non profit does not mean you are a tax-exempt non profit, i.e. 501(c)(3), which we were explicitly told by the accountant was not possible) ( Ken Jameson should know this, Since he worked for the IRS). For federal tax purposes, an HOA is considered a business. While you’re a non-profit, you still need to file taxes as any other corporation would. However, just because filing a tax return is mandatory for the HOA, it doesn’t necessarily mean any tax would be owed. The vast majority of the association’s revenue will likely be classified as exempt income. But they may have small amounts of other income, such as interest and dividends. These amounts could result in a tax liability. Regardless, of “thinking” nothing would be owed or filing is not required, every domestic corporation must file an income tax return whether or not they have taxable income. A HOA would file either a form 1120, or in the case of eligible HOA’s 1120-H.
This comes back to one of the questions that was raised, which was by myself and Stu McWilliam; Which was our request for the EIN number for Bay Ridge Community Club. This is not secret information, its clearly listed on the secretary of state website for any In good standing non-profit corporation. It’s not listed there so that raised concerns. One of the reasons for the EIN was the need to change the associations bank account to a bank in Blaine instead of Bank of America which has reduced down to only one local branch, and wasting money spending for gas to go to the bank in bellingham to deposit checks is a waste of HOA money. The other reason for the EIN request was for the setup of online payments for dues collections to make things easier for people to pay, i.e. owners that do not live here year round, people that would rather pay via card.
End of THIS story is… Nobody knows the EIN (or its being withheld for zero reason) because taxes have never been filed, and the EIN does not exist. Really its as simple as just admitting that, but instead gets covered up, hush hush, delays other business by other volunteers taking their time to organize and better setup regular business function.
More chapters to come.
4 Comments
My Question is.. What does Judy Jones do if we are paying an accountant to send out annual dues and Financial prep? This is ridiculous to pay this astronomical amount! Please advise
First off, thank you for your email with your name included and including a worthwhile question. Second, please see the duties of the Treasurer per the Bylaws following: “The Treasurer shall exercise control over all funds and securities of the Association except those which are placed under the control of a Manager. The Treasurer shall deposit all funds of the Association in such federally insured financial institution(s) as may be designated by the Board of Directors. (S)he shall disburse funds in accordance with the Association’s Budget and as ordered by the Board of Directors. With the assistance of any accountant or Manager employed by the Association, the Treasurer shall keep the books of the Association on an accrual basis, with detailed accounts of the receipts and expenditures affecting the Association, in at least the detail required by Section 8.4 hereof. The books and supporting vouchers and records shall be available for examination by the Owners, Mortgagees and their duly authorized agents or accountants or attorneys, during regular business hours in the manner set by the Board of Directors. All books and records shall be kept in accordance with generally accepted accounting principles.” Note that it includes the phrase “With the assistance of any accountant or Manager employed by the Association,….”. Third, in addition to having the accounting firm do the actual input of the financial transactions of the Association, the Treasurer is RESPONSIBLE for the receipt and disposition of all Association funds. Judy receives the dues, when they are actually paid, receives the various bills and determines their validity and makes payments. She then sends the deposit information and paid invoices to the accountants for inclusion in the Association books and records thru Quickbooks maintained by the accountants.
To return to your question as to why we are paying this “ASTRONOMICAL AMOUNT”, ask Jamie who the individual was that was in charge of the bookkeeping duties at that time and failed to properly perform those duties. Also, in an attempt to get the situation back on track, as the responsible individual was employed at that time, Judy offered her assistance to that individual.
Again, thank you for your inquiry and time.
Ken Jameson, President
BRCC HOA
Your excuses for the current situation regarding the accounting overspending are LAUGHABLE at best.
A) You’re clearly misinformed.
B) You also have zero apparent idea why the books were transferred and the goal in the first place.
C) You also have zero apparent idea as to the fact this isn’t about that, or WHY they were transferred, it has to do with WHY now that presented with factual information you still think its a good idea to argue that just because “WE CAN” rely on an accounting firm to manage the button pressing that is the TREASURERS job, Doesn’t mean we SHOULD. Especially when the treasurer doesn’t work, and the duties without the books is hardly anything. There is ZERO reason that the QuickBooks could not be managed by the treasurer especially since once obtained from a bookkeeper it should be 100% accurate and really easy to upkeep. Entering into QuickBooks vs entering on a napkin or excel sheet isn’t much different, at the end of the day it has to be entered so why not SKIP a few steps and just do it ONE time and not rely on a company to press the buttons for 2K a year.
D) The fact you apparently think its ok to spend $5K+ since 2019 is also dumbfounding, when even Judy herself said its such a easy job and things should have been completed faster in her mind. ( that could be another $5K+ in the bank account right now instead of paid out for no reason)
I am the person that Ken is referring to, not Jamie. I was the treasurer at the time when we decided to switch the accounting from paper to QuickBooks. During this time it was discovered that there were several missing documents, and that there were several hand written notes that weren’t adding up when entered into QuickBooks. The board decided to have an accountant that specializes in HOA’s to help clean up the books and file our taxes, since the taxes had not been filed for many years. Then once the books were cleaned up and the taxes filed, the HOA would take back over the accounting.
During this time the accountant discovered that we did not have our EIN so she requested the application to be sent to our HOA mailbox so that we could fill it out and send it into the state to receive the EIN to give to the accountant so they could file our taxes.
Yes, during this time I was working 45-60hrs a week, so Judy kindly offered to help me with various duties like deposits and such.
Shortly afterwards, I had to resign from the treasurer position due to personal reasons, so I was unable to oversee the request for EIN, filing of the taxes, or taking back over the accounting. This was 5+ years ago, so by this time this should have already been completed and given back to us to take over the accounting.