Celebrating 10 years! 2007-2017

Homeowner Association Donating Money to Charity

I have a client in Virginia who a treasurer on a civic homeo stonewalljacksonfan11/20/17
I guess my first reaction to this civic association that is superttthero11/20/17
Checking the bylaws is the best way to start. It should outl thirdtierlaw11/20/17
These moral obligation shake-downs in No. VA can get as bad aknas11/20/17
What 3tier said. No record of votes? Davis Stirling Act?? 2ski11/20/17
What if the board is not officially elected and there is no stonewalljacksonfan12/02/17
First things first. Get answers to 3tier questions. That w 2ski12/04/17
I am not sure about the status of association. There is very stonewalljacksonfan12/06/17
Yeah this is clearly not an HOA. More like a neighborhood as onehell12/06/17
Some assumptions. $25/yr is not much at all. If there were 2ski12/06/17
ok, what if they are no bylaws or bylaws do not specify the stonewalljacksonfan12/06/17
I assume that both your organization and the receiving one a onehell12/08/17
bingo. no rules, no enforcement. 2ski12/06/17
Oh and to your earlier question, yes, embezzlement could hap 2ski12/07/17
stonewalljacksonfan (Nov 20, 2017 - 12:05 pm)

I have a client in Virginia who a treasurer on a civic homeowner association board. There are no common elements, it is just a voluntary association of owners living on a historical street. There is a Board, composed of President, Treasurer, Vice Presidents. The association receives a small grant from the City for the benefit of the association and the street. The President feels that this is free money and decides to donate the money to the charity of his choice. The charity of his choice is a nearby black community that needs money for string instruments for its children, so it is interpreted to be community outreach (even though it is not clear if there will be any reciprocation for the donation). The Board votes in the absence of the treasurer to donate. The Board does not keep a record of the vote. The President demands the check from the treasurer to make the charitable donation. The Board is not elected by the homeowners, but there is an anecdotal support of the action by some of the homeowners. Are there any issues here?

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superttthero (Nov 20, 2017 - 12:07 pm)

I guess my first reaction to this civic association that is "homeowners" just in name is to check the bylaws.

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thirdtierlaw (Nov 20, 2017 - 12:17 pm)

Checking the bylaws is the best way to start. It should outline exactly what can and cannot be done by the organization. If it's voluntary, it doesn't really sound like a homeowner's association. Are there any strings and conditions on the grant money. That'd be my biggest concern if I was the organization.

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aknas (Nov 20, 2017 - 12:35 pm)

These moral obligation shake-downs in No. VA can get as bad as criminal or legal shakedowns in The District!!!

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2ski (Nov 20, 2017 - 1:25 pm)

What 3tier said. No record of votes? Davis Stirling Act?? Published annual budget with line item expenses? Sounds like Pres is not including the Grant into the operation account and passes it along as he wishes. How does this pass an independent annual audit? Is this an annual donation to Pres charities? Guessing the city is providing funding to offset the higher costs of maintaining a historic home to preserve the unique character of the city. And this donation violates this intent.

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stonewalljacksonfan (Dec 2, 2017 - 4:56 pm)

What if the board is not officially elected and there is no provision in the bylaws to donate money to charity? (however, there is anecdotal approval of the decision by some homeowners on the street). Is there any potential for embezzlement issues - board of a social organization with no authority to donate the money votes to donate the money and gives away the money that they are fiduciaries of.

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2ski (Dec 4, 2017 - 8:20 am)

First things first. Get answers to 3tier questions. That will give you the foundation to proceed. If you don't have an actual HOA then your options are limited.

Who exactly elects the board members? Do they collect assessments from historic homeowners? What is it used for? Do you have any governing documents?

I would sort this out before going to the city in which they will stop the payments. Probably also need a forensic accountant to look things over.

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stonewalljacksonfan (Dec 6, 2017 - 5:16 pm)

I am not sure about the status of association. There is very little documentation. Board members are not elected by an actual vote, but are appointed. There is a voluntary 25 dollars a year donation from people willing to be members. The funds in theory have to go to Street beautification. Why are options limited if it is not a HOA? Ultimately if there is no authorization to donate money to a third party by the board and the board still donated the money, then what are the implications?

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onehell (Dec 6, 2017 - 6:26 pm)

Yeah this is clearly not an HOA. More like a neighborhood association, most likely organized as a membership nonprofit. Members in a membership nonprofit only have such rights as are specified in the bylaws and articles, which specify what (if anything) has to go to a full vote of the membership.

It's like when you "join" the ASPCA or whatever. The little membership card you get in the mail doesn't give you any rights unless the corporate documents say otherwise.

Why are options limited if it is not an HOA? Because they chose to put that in the documents for some reason. But the board can amend the documents to get rid of that restriction as easily as they created it, unless such changes have to go to a full vote of the membership.

If they are doing things that require membership vote without such vote, I suppose as a member you'd have standing to sue but why the heck would you bother? It's $25 a year. If membership is voluntary and you don't like what they're doing, just stop paying your dues.

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2ski (Dec 6, 2017 - 6:16 pm)

Some assumptions. $25/yr is not much at all. If there were 100 homes x $25= $2500/yr annual budget. Enough to support painting of a street sign at each end of the street maybe.

If it is a true Hoa, then they have to file as a non-profit corp with the state for tax exempt status. Assuming an accountant is $600/yr to prepare these filings. So with annual budget at $2500 not much room for this.

Options limited as a Hoa has bylaws which spell out exactly how the organization is to be run. Whit that comes enforcement by its members to comply.

Voluntary donation sounds like a simple community ad hoc group. With a self appointed king. So, not much you can do about it.

If you can convince the others of your concerns, maybe you can reorganize the group. It is sounding a bit like the volunteers like the titles they have. Much like some folks(wives)that are worthless but spend all of their time involved in multiple charities so they can say how great they are.

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stonewalljacksonfan (Dec 6, 2017 - 7:43 pm)

ok, what if they are no bylaws or bylaws do not specify the situation of donating to a third party? Is it an extra legal action, or can they do whatever they want of there are no bylaws.

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onehell (Dec 8, 2017 - 5:21 pm)

I assume that both your organization and the receiving one are 501c3s. If so, the default rule is that the company must be operated exclusively for charitable, mostly nonpolitical purposes and can have no "private inurement," which basically means it can't have equity owners or operate for the benefit of insiders, e.g. by paying more than fair market value for goods and services and employee compensation.

So unless there is some other restriction to which the company has voluntarily subjected itself, or a clear contract with a donor that restricts the use of funds, or some unusual creation of state law that goes beyond this baseline, the only restriction beyond "charitable purpose and no private inurement" is one the organization creates for itself.

In the absence of such self-imposed restrictions, a donation from one 501c3 to another 501c3 is consistent with charitable purposes by definition because the donee is subject to at least the same restriction as the donor.

But again, who cares? It's $25 per year and purely voluntarily. If you don't like what they're doing, stop paying your dues. There's a reason the IRS so rarely audits small tax-exempt organizations. They assume that if an organization isn't doing the kind of good in the world that justifies its tax exemption, then people will stop donating to it, the organization will go out of business, and the problem will solve itself. So stop donating to it.

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2ski (Dec 6, 2017 - 7:53 pm)

bingo. no rules, no enforcement.

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2ski (Dec 7, 2017 - 9:33 am)

Oh and to your earlier question, yes, embezzlement could happen easily. Seems very little oversight.

I'm guessing you are deliberately vague on purpose and I understand but unless you get a majority of the homeowners on your side it doesn't look there is much you can do about this.

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