By Betsy Barbieux, CAM, CFCAM / Published June 2019
You read of these things happening, and you know it is this type of situation that causes a lot of new law each year, but you don’t think it will happen to anyone you know.
Enter newly elected board members!
And you know where this is going….
Calls to the banks, calls to the sheriff’s department, calls to the insurance agency, inquiries, subpoenas, attorneys, and dozens and hundreds of hours later, this new board finds they are out tens of thousands of dollars embezzled by the employee in whom previous boards had full confidence. And of all the insurance policies, they did not have—you guessed it—the fidelity bond (sometimes called the crime policy). It will take months to straighten out all the financial records and determine how much money is missing—money they will never recover.
Truly, where there is a will, there is a way to steal money. However, there are several things previous board members could and should have done. And these things should be considered by every board member, whether you’ve been on the board for years or are just newly elected.
Never hire someone who is not a licensed CAM—no matter what! It doesn’t matter what title you give the people in your office; if they are doing any one of these tasks below, they must have a Florida Department of Business and Professional Regulation CAM license.
Section 468.431(2), Florida Statutes, states: “Community association management” means any [one]of the following practices requiring substantial specialized knowledge, judgment, and managerial skill when done for remuneration and when the association or associations [cumulative] served contain more than 10 units or have an annual budget or budgets [cumulative] in excess of $100,000:
Remember, board members act in a fiduciary capacity and are charged with protecting the property and its value, maintaining the common elements, and enforcing the restrictions in the governing documents. Sections 718.111(1)(a), 719.104(8)(a), and 720.303(1) all basically say the same thing: The officers and directors of the association have a fiduciary relationship to the unit owners (members). The definition of fiduciary is “a person to whom property or power is entrusted for the benefit of another.”
We can look to the not-for-profit corporate statute, Chapter 617, for more guidance on fiduciary duties.
Section 617.0830 (in part), Florida Statutes, contains general standards for directors:
(1) A director shall discharge his or her duties as a director, including his or her duties as a member of a committee:
In other words, your board members act in a capacity similar to your financial planner; they make decisions on your behalf that affect your assets. Hence, our statutory “open meeting laws” that require boards to make those decisions in the presence of the owners/members to whom they have a fiduciary duty.
Accordingly, all board members are required to “certify,” either by signing a certificate affirming their knowledge of all their fiduciary duties and all the requirements in the governing documents or by participating in a state-approved class and producing a Certificate of Completion. A board member who does not “certify” within 90 days of being elected or appointed is removed from the board until he or she complies per (Sections 718.112(d)(4)(b), 719.106(d)(1)(b), and 720.3033(1)(a), Florida Statutes).
A CAM and educated board members would have known that a fidelity bond is required by statute for “the maximum funds that will be in the custody of the association or its management agent at any one time” (Sections 718.111(11)(h), 719.106(1)(k), and 720.3033(5), Florida Statutes).
A CAM and educated board members would have known that for condominiums, insurance appraisals based on replacement cost valuations are required every 36 months and have been ever since Hurricanes Charlie, Frances, Jean, and Wilma.
While there are many banks, insurance agencies, and accountants to choose from, not enough good can be said about those banks, insurance agencies, and accountants that are specialized in the community association industry. They know our specific statutory requirements.
Right now, there is a lot of “who is to blame” talk going around. Is it the previous board members, the ex-employee, or the insurance agency? It would seem the statute indicates the “buck stops with the board.”
Betsy Barbieux, CAM, CFCAM
Florida CAM Schools
Betsy Barbieux, CAM, CFCAM, guides managers, board members, and service providers in handling daily operations of their communities while at the same time dealing with different communication styles, difficult personalities, and conflict. Effective communication and efficient management are her goals. Since 1999, Betsy has educated thousands of managers, directors, and service providers. She is your trainer for life! Betsy is the author of Boardmanship, a columnist in the Florida Community Association Journal, and a member of the Regulatory Council for Community Association Managers. For more information, contact Betsy@FloridaCAMSchools.com, (352) 326-8365, or www.FloridaCAMSchools.com.