The Days of Condo/HOA Slush Funds Should Be Long Gone
HOAleader.com - Tip of the Week - February 9, 2024
In this week's tip, we help out an HOAleader.com reader who wants to know if it's normal for a board president to be able to spend up to $5,000 with no questions asked.
Our experts, to a person, say this is bad news—both the amount and the lack of accountability.
"That's crazy," says Melissa Garcia, a shareholder at Altitude Community Law PC in Lakewood, Colo., who provides advice and counsel to Colorado associations in all areas of community association law. "That raises huge red alarms.
"I don't necessarily have a problem with the association giving that spending authority to a president if there are processes in place," says Garcia. "Many associations give management companies an amount like that for an emergency. And I don't see why a board couldn't give a president that authority as well if they must immediately notify the board of the expenditure and document
it."
Nancy T. Polomis, a partner at Hellmuth & Johnson PLLC in Edina, Minn., whose clients include local developers and condos and HOAs throughout Minnesota, agrees. "In Minnesota, boards can authorize a president to spend up to a
certain amount," she states. "Usually, that's pretty low. It's $500, maybe $1,000. It kind of depends on the size of the association.
"This is similar to some management contracts, where the board gives the manager the authority to spend no
more than, say, $5,000 without prior approval so that if there's an emergency, the manager can act quickly to fix it," adds Polomis. "But if it's just going to be the board authorizing the president, I'd say $500 to $1,000 is the right amount."
But remember, boards act as a group, so it should be very rare for one board member, such as a president, to need to spend money individually.