Below is a helpful tip from the Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC regarding the question of violation of our board’s fiduciary duties, misuse of funds, and embezzlement. It reads as follows . . .
QUESTION: Our association spent $2,000 on a holiday party. We were told that doing so was a violation of our board’s fiduciary duties, a misuse of funds, and embezzlement. The person claims the board has to refund the money to the HOA immediately. Is that true?
ANSWER: No, it’s not true. It is common in the industry for associations to host different events for homeowners and board members. Neither instance amounts to a breach of fiduciary duties, misuse of funds, or embezzlement.
Community Events. Money authorized by the board for community barbecues, tennis tournaments, Christmas decorations, bingo nights, a New Year’s dance, etc. all benefit the community even if some members attend but others do not.
Board Appreciation. Money spent on a board appreciation dinner as well as certificates and plaques given to volunteers is perfectly legal. It rewards volunteers and encourages others to volunteer. All of these activities are common in the industry and do not qualify as a misuse of funds or breach of fiduciary duties.
Possible Defamation. Embezzlement is the fraudulent taking of money or property of another by misrepresentation or concealment of information. Community events and board appreciation events do not qualify as embezzlement. Persons who maliciously accuse boards of a crime face possible defamation actions.
RECOMMENDATION: Members should be grateful that neighbors are willing to volunteer their time to help the community. Instead of being a Grinch and criticizing special events, members should support and participate in them.
DISCLAIMER. The Davis-Stirling.com Newsletter by ADAMS | STIRLING PLC provides commentary only, not legal advice. For legal advice, you’ll need to hire legal counsel. You can hire ADAMS | STIRLING PLC; Keep in mind they are considered corporate counsel to associations only.