Dear Residents of Cedar Springs 3rd & 4th Filings,
An Oversite Review was initiated by the current CSIA Board to:
1.Understand how HOA finances have been managed
2.Review activity for indicators of fraud, embezzlement, or misuse of HOA funds
Period Reviewed: January 2019 to Present (March 2023)
This message serves as a summary report of the review, available to all HOA members. We will be adding a section on the website with all documents and financial statements associated with the findings described below.
Soon a survey will be coming out for HOA members to assist in determining how to proceed with the HOA status and funds. The survey will be distributed via the blog you signed up for that allowed you to receive this message.
At our next HOA Member meeting, scheduled to take place on June 7th at 6:30 pm (location TBD), we intend to call a vote seeking to determine if members want to dissolve the HOA permanently and transfer the lake to a community wide lake association where all filings can play a role in maintaining it. We will then call a community wide meeting.
Thank you for your patience with us as we have volunteered our time to make sure the fees you are paying are spent with transparency and efficiency. We hope you find this information useful when completing the survey that is to be sent out next.
Below is a summary of the findings described in financial detail in the next section.
First, the picnic tables that were installed. At a minimum, from the receipts provided, the picnic tables cost $9,861. This money comes from the dues all of us pay as well as fees the HOA obtains from putting leans on HOA member houses. We know now that Chris Brock hired her son, Jason (Elkhorn Logistics), to perform most of the work. $9,561 of the total cost of the tables was paid to Chris' son in 2021 out of HOA funds (your dues and leans that were put on houses). There is no record of this project being disclosed for members to vote on whether it should happen, nor was the total cost of this project publicly disclosed to the community. According to our bylaws on our website, by hiring her son, she violated the “Policy for handling conflicts of interest of directors.” Furthermore, we have no record that additional bids were obtained before this work was performed and have no idea whether this figure was an appropriate amount or not. We intend to investigate this cost further.
Next, we want to discuss actual Board member stipends and how those were rewarded. The Board was not only lying to the public according to our previous meeting minutes from the 2021 meeting in which Chris manipulated the budget amounts hiding higher stipend amounts as well as raises that were given with no notification or request for votes from you all as the HOA members.
Per financial records, the actual total stipend amounts for 2021:
Chris Brock - $5,672.21 (salary, phone, internet)
Jon Shepard - $1,050
Diane Haight - $600
Alicia Condor-Malone -$600
Total spent on stipends in 2021 = $7,922.21
There are multiple issues we see with these stipends. First, the fact that $7,922.21 accounts for over 2/3 of the $8,950 HOA’s annual dues. Second is that we cannot find any meeting minutes or bylaws that state anything about board members receiving stipends and what that amount should be. We do not know how we got to the point of board members receiving this amount when there are no legal documents in the bylaws stating the amounts or the fact Board members are to receive a stipend at all.
Additionally, we found financial statements showing that in December of 2020 Chris Brock paid herself her board stipend of $1500 for January to June 2021. She then received two additional checks for the amount of $750 for time within the same stipend period January-March 2021 stipend and the April-June 2021 stipend. This indicates that she stole funds by paying herself the same board stipend twice. We found other years in which this occurred and will include the statements on the website.
There are also bills showing that Chris was paying for her phone, internet and misc funds to use her home as the HOA’s office. At least $1,172 of HOA funding was spent onChris’ internet and phone bills in 2021. In the numerical section below you will find a breakdown. We will include financial statements with amounts used monthly in the scanned documents that will be uploaded to the site.
There are no records of members being able to vote on whether stipends, payments for utilities, or raises should take place for Board members. Chris gave two separate raises to Jon Shepard who was brought on as the Architectural Committee rep in January of 2021 and transitioned to VP. One month later we have email records of Jon asking to step down from the HOA Board and financial records note another increase in his stipend initiated by Chris from $600/6month to $750/6month. Before Jon resigned in 2022 he was at a stipend rate of $1450/year. According to emails, it appears this was also on behalf of Chris.
“The AC job has no pay at this time but we felt strong about your qualifications and so the stipend would be the same as we discussed. $600/qtr-½ paid in June and then again in Dec.”
Next, the matter of the “old firehouse” on chipmunk drive. It was being rented out for $275/month to residents on storm mountain and should be vacated at this time. There are no records of checks the renters sent being cashed into the CSIA Board account. The cost of the "old firehouse" is significantly more than what is received. One option is to sell this as it is no longer an asset worth holding onto. In fact, it has been costing the community money. There is no evidence that the renters’ checks were being deposited into the CSIA bank account and hundreds, sometimes thousands of dollars were spent each year on PVREA bills, insurance for the firehouse, and cleaning brush around the firehouse. We will be soliciting a vote to see if we should keep or sell and will make a final decision after the community has voted publicly at our next meeting. If the community agrees, we will then speak with a realtor and get an appraisal done and pursue selling it. The only issue we see in selling it is that the picnic tables are on that property and will have them moved onto the lake property.
How do we resolve and recover the monies that have been misappropriated? The board has found a certified fraud examiner. They specialize in recovering lost/stolen funds in companies/HOA’s. We intend to hire them to help us account for all missing funds. Why should we hire someone instead of totaling the amounts ourselves? Because, they are legally bound and insured to certify that every penny that is missing is true in a court of law and it eliminates any accusations that a board member has manipulated the amounts stolen. Why not an audit (which is what was previously implemented every year)? An audit is very expensive ($5,000/yr+) and will only tell us if money is missing, not where it went.
Once we know the final amount how do we actually recover these funds? We have already been in discussion with our insurance company and there is coverage for board member dishonesty and fraud. We will take the total amount from the CFE and file an insurance claim for reimbursement.
We understand this letter will make many residents upset one way or the other. We are speaking with attorneys as well and once this investigation is completed and funds recovered we intend to call a vote seeking to dissolve the HOA permanently and transfer the lake to a community wide lake association. We will then call a community wide meeting strictly to discuss the matter of the lake and its future within this community.
We hope you find this information useful in filling out the survey that is to be sent out next. Also please reference the documents page that will be uploaded with the financial statements and emails that coincide with this email and survey.
Sincerely,
The CSIA Board
OVERSITE REVIEW WITH FINANCIAL SPECIFICS
- INITIAL FINDINGS -
Project: No Votes, Conflict of Interest, Potentially Extortionate
· Item Reviewed: two picnic tables built approximately 100 yards from the lake on a separate lot from the lake "old firehouse lot".
· Date: throughout 2021
· Cost: $12,293.59 HOA funds were paid to Elkhorn Logistics LLC (Chris Brock’s son) in 2021.
o At least $9,516 of this was used to make the picnic tables.
o $175 of HOA funds was spent to pay for picnic table signs.
o $170 of HOA funds were used for a port-a-potty at the picnic site during construction
o All funding for the picnic tables came from annual HOA dues & fees.
· Contractor: Elkhorn Logistics owned by Jason Wilson, son of former HOA Pres, Chris Brock
· CSIA Bylaw Violations:
o Failed to conduct a Special Assessment (bid) for the project
§ No additional bids were taken to determine that the cost of the job was within reason.
o Failed to disclose and allow HOA due payers the opportunity to vote on whether their funds would be used for the project
§ CSIA Bylaws - Section 3, Special Assessments (building projects):
· A) Special assessments, that exceed the annual dues ($50 per lot/$8,800 total, but $x was received that year), to fund any single liability shall be presented by the board at a members meeting. The reason for the special assessment, the amount of the assessment and any alternatives to the special assessment shall be included in the presentation.
· B) A two-thirds (2/3) vote of members present is required to approve any special assessment.
o Conflict of Interest: HOA funds cannot be paid to anyone related to a Board member
§ The former HOA President’s son was hired and paid to build the picnic tables.
§ "Conflict of Interest" shall be defined as any contract, transaction, or other financial relationship between the Association and a director of the Association, or between the Association and a party related to a director, or between the Association and an entity in which a director of the Association is a director or officer or has a financial interes
Salaries and other Board Member Stipends
· Item reviewed: salary and other stipend payments to former Board members
· Date: 2019-2023
· Cost: The amount spent on stipends/year was well over the amount declared and at one point was cost over 2/3 of the HOA funds collected each year from members.
o All funding for stipends came from annual HOA dues and fees
· CSIA Bylaw Violations:
o Stipends paid without a community vote.
§ HOA members have the right to vote on whether HOA Board members will receive stipends and if so, how much.
§ There is no record of any community voting taking place in relation to Board members receiving stipends.
o Failed to describe stipends in bylaws.
§ Bylaws must indicate Board members can be paid & what amount.
§ No CSIA bylaws indicate Board members can collect a stipend.
· Per the Colorado State laws that govern HOAs: “Although the Colorado Revised Nonprofit Act allows a corporation to compensate its board of directors, an association's governing documents must allow for compensation. Be sure to review your governing documents, as many association declarations call for a volunteer board, but also allow reimbursement for related expenses. Additionally, you should consult with your association's attorney and insurance agent before compensating any board members, as there may be insurance concerns. Finally, be sure to discuss with your attorney how compensated board members may be treated under the business judgment rule if litigation surrounding a decision by the board is ever instituted.”
** For the reasons stated above, the current Board members have chosen to not receive stipends of any form starting at their original appointment on the Board.
Claimed vs Actual Stipend Salary Totals
o Column B: stipend amounts declared by the previous CSIA Board President indicating how much each member received in their respective role per year. The image containing verbiage below was pulled from the 2021 Member Meeting minutes.
o Column C: actual stipends paid to the Board according to financial records.
In addition to salary stipends, the following bills were also paid using HOA funds for the President’s home address:
Below is the sum total of stipends (salary and miscellaneous) that was paid to Board members per year using HOA funds (dues and fees).
· If all HOA members pay their dues, the total comes out to: $8,950 collected/year.
o 179 lots at $50/year/lot for dues
o These numbers are from the 2021 Member Meeting minutes
· 85% of annual HOA dues were used to pay for HOA Board stipends in 2021.
Duplicates Stipend Payments
The former board President, Chris Brock, received stipend payments three times for the same period. Note the payment period on the check memos (in the rectangles) below and the use of different signatures from different board members.
· This is a form of “double dipping” of board stipends and is fraudulent behavior.
The amount cashed for stipends from March-June 2021 comes out to $3,000 (see checks below $750 + $750 + $1,250). This amount is well over the $210 per quarter that should have been cashed for Chris Brock serving as President and Treasurer.
· $50 (President stipend) + $160 (Treasurer stipend)) = $210 – these numbers are from the 2021 Member Meeting minutes shown in the verbiage below.
Checks images:
Miscellaneous Expenses
Below is a list of miscellaneous expenses that were paid for using HOA Dues
Miscellaneous Action Items
· Need to assess if any votes were taken to determine it was permissible to use HOA funding for 4th of July party (all of Storm Mountain is invited) charges. No funding from people who paid to attend the 4th of July party were recorded as deposited into the HOA bank account.
· The Firehouse brought in $3,000/year in rent, but costed approximately ~$2,500/year to maintain and insure. No checks for renting the Firehouse were recorded as deposited into the HOA bank account.
Certified Fraud Examination
Due to these findings the Board has agreed to hire a certified fraud examiner. We intend to have an appropriate investigation to find out how much money in total was misappropriated.
· Our insurance policy has coverage for Board member fraud and we can file a claim to recover this abused funds.
· The investigator is fully insured and professionally guarantees her findings. We chose this route because it eliminates any potential errors from the current board from being made.
· After interviewing several certified fraud examiners the Board found one local to the Colorado area. More information will be provided once a retainer is in place.
· The estimated cost is $3-7,000 for a 7 year investigation of our finances. Many of you may remember that the quote for a financial audit came in roughly the same PER YEAR. This is a huge savings to the community and will paint a very clear picture of the last 7 years of Board spending.