Mon, Jun 1, 8:34 AM
To the Board:
I've made several suggestions over the last 3+ months in various emails to the Board. This email summarizes them in easily digestible form:
1. The Board should have regular discussions, about once a month. In the time of COVID-19, they should be by video conference, and that's also a good way to have them in ordinary times. The members need not be invited, as long as we take no action.
2. The Board should have its quarterly meetings, also by video conference until it's safe to have them in-person. The members do have to be invited, but video conferencing makes that easy to do.
3. Many, if not most, pressing issues can be resolved by an Action Without Meeting, which is provided for both in our Bylaws and in the Colorado Revised Nonprofit Act. I've asked for only two things: (1) that our procedures follow the law, and (2) that our action be posted on the website so the members can see what we've done. In the case of an Executive-Session action, a redacted version of the action can be posted. (We already did this once, on Feb. 26.)
To the Board:
When I look at a financial statement, I focus on the 4 numbers that form its backbone:
Starting Assets + Income - Expenses = Ending Assets
Starting Assets don't appear on the May 2020 Treasurer's Report, but from the 2019 EOY report they were $50,547. So, based on the May 2020 Report, we have:
50,547 + 31,493 - 19,528 = 62,512
But that Report gives a different number for the Ending Assets: 65,863.
One problem is that the Report counts the starting checkbook balance as income, which double-counts it, since it also is part of the Starting Assets. Another problem is that a $10,000 transfer from checking to savings is recorded as an expense, when it is really just an internal transfer between accounts. (In an earlier report, the reverse transfer was counted as income, also incorrect.)
This is unfortunate, because HOA members who glance at the Report that just appeared in the newsletter would see that we have spent $19,528, when we've actually done much better, having spent only $9,528.
With those two out-of-place entries removed, we have:
50,547 + 24,800 - 9,528 = 65,819
Which is essentially the same as what the Report gives for Ending Assets. (It would be even better if the numbers agreed exactly.)
Future Reports would be more complete and less confusing if:
1. Starting Assets were shown explicitly, so the previous report (not posted on the website, in this case) wouldn't have to be consulted for the number.
2. The starting checkbook balance was not called income, since it is not income in the period being reported.
3. Internal transfers between accounts were not recorded as income or expenses. In fact, there's no need to itemize amounts in the checking and savings accounts separately, as they together constitute the cash assets. (The separate amounts could be in a footnote, for anyone who cares to know how much is in each account.)
To the Board:
Recently one of our members has declared herself Acting President, and has started to take action as such. This is unlawful, as the Bylaws provide for no such position.
The correct way to proceed is for the Board to elect a President and Vice President at a Board meeting, or, if necessary, via Action Without Meeting. I have suggested several times that the Board do this, within the constraints of COVID-19, most recently in my email of 1-June-2020. Our law firm, Altitude Law, recommends virtual meetings on its web site, and they are used by numerous governmental and nonprofit boards. (I should note that a virtual meeting does not require a participant to have video equipment; the major virtual-meeting vendors provide for use of an ordinary telephone.)
This recent development is just one on a growing list of Board irregularities:
1. Failure to meet quarterly, as required by the Bylaws, nor to determine otherwise, as the Bylaws require.
2. Approving and distributing financial statements that substantially misrepresent, by thousands of dollars, the income and expenses of the HOA.
3. Failure to post any 2019 financial statements on the web site.
4. Taking Action Without Meeting without conforming to the Bylaws (unanimity is required) or the Colorado Revised Nonprofit Act (unanimity to take the action; majority for the action itself).
5. Planning to hold an unlawful non-public Board meeting.
(I have previously sent emails objecting to all of the above.)
To quote from a letter earlier this year to the Board from our attorney, Melissa Garcia: "Board members must act ... in a manner the director believes to be in the best interests of the Association. So the duty is owed to the Association, not to the other directors ..."
I also remind the Board of something I learned in one of the classes conducted by Altitude Law earlier this year: D&O liability coverage may not indemnify a board or board member against actions that are knowingly made unlawfully.