The Need for a Purchasing Policy
Updated: Sep 9, 2019
As a new resident of Ahwatukee, I was searching for a way to get involved in my community. As luck would have it, I received a letter from my homeowners association, the Foothills Community Association (FCA), looking for candidates to run in its upcoming annual election last April.
I felt that running for a position on the Board would be a great way to get to know my neighbors and to give back to my community, so I threw my hat in the ring.
I was extremely involved in my registered community organization back in Philadelphia, where I served two terms on the Board. I assumed the community politics would be somewhat similar.
I was not expecting the novella drama that I witnessed at my first annual HOA meeting in April. The majority of the crowd that evening was visibly upset over a number of issues, and many spoke up against the board.
Many members complained about the Board’s unilateral decision to increase the number of board members from five to seven and its decision to select and appoint the new Board members without a vote.
A plethora of other issues were raised that evening, including the board’s lack of transparency, poor communication and questionable fiscal management decisions as it pertained to management of the FCA’s reserve fund.
That evening a contractor provided an update to the members of the HOA regarding the status of a sprinkler replacement project that the Board had previously approved. Some members questioned the necessity of the project, but I had different questions.
How much was the sprinkler replacement contract for, and how was it bid? After some digging around into past HOA meeting minutes, I was able to quantify the sprinkler replacement contract to an amount over $1 million.
Through this research, I also discovered that The Foothills Community Association does not have a formal purchasing policy in place. How is this possible? Nearly two million dollars pass through this HOA annually and there is no purchasing policy.
In addition, HOA members have zero oversight or say into how the dollars are spent. Often, board members control lucrative contracts for local vendors. Kickbacks can occur when a single Board member, or group of members, conspire to receive gifts, favors, or money from a contractor in exchange for HOA contracts. There is a lot of money at stake and safeguards must be put into place immediately.
I have been working in the facilities management and construction industry managing hundreds of millions of dollars for almost two decades. Every organization that I have ever been involved with entrusted me to manage their funds with the proper safeguards. Adopting and implementing a purchasing policy is not rocket science.
The best and most effective purchasing policies are just common-sense rules, such as the following:
Open bidding process
Multiple bids required
Board member disclosure of any conflicts of interest
Multiple signature authority required to award a contract
Too often, we see stories in the news about HOA board members embezzling funds. The common denominator in most of these stories is usually inadequate or nonexistent accounting controls and no oversight.
We do not have to look very far for a story like this because just last month in our own backyard, a local Kyrene School District PTO contacted the Phoenix authorities to investigate $20,000 of missing funds.
I have offered my time to the Board on multiple occasions to help craft and implement a purchasing policy that makes sense for our community. I have not heard from the board and the offer still stands.
Rafael de Luna III
Reprinted from the The Ahwatukee Foothills New, September 4, 2019