Governance Failure: How Treasurer Inaction Forced Revocation of Authority & Threatened Services

Date: Dec 31, 2023 Category: Association Governance / Financial Transparency

Summary Effective HOA governance relies on the timely payment of vendors who maintain our community. In late 2023, a significant lapse in financial administration occurred when Radius at Whisman Station HOA in Mountain View CA Board Treasurer Patrick Szeto failed to release payments for essential services for over 100 days. This inaction persisted despite explicit warnings from vendors regarding interest charges and confirmation from management that such delays were a recurring issue causing the Association to incur late fees. Consequently, the management company was forced to intervene by revoking Director Patrick Szeto’s invoice-approving authority.

The Fiduciary Duty of the Treasurer Under the Davis-Stirling Act and our governing documents, Board officers—particularly the Treasurer—have a fiduciary duty to act with the care of an ordinarily prudent person. This includes the routine and timely approval of valid invoices to prevent the Association from incurring unnecessary interest, penalties, and late fees.

Timeline of the Delays (2023) According to Association records:

• July 15, 2023: Invoices for community maintenance began to accrue.

• The Vendor Warnings: By October 2023, the vendor contacted the HOA to plead for payment. The vendor explicitly warned that they wished to avoid charging interest on the aged invoices .

• October 23, 2023: A review of the accounts revealed that 8 separate invoices were overdue. The oldest invoice, dated July 15, 2023, was listed as 97 days old at that time, meaning it exceeded 100 days of delinquency shortly thereafter .

• Management's Assessment: The HOA Management formally noted to another Director that the Treasurer's pattern of delayed invoice approvals was a known issue that frequently may have resulted in the Association paying late fees .

The Operational Risk: Impact on Vendor Quality & Motivation Beyond the financial cost of late fees, delaying payments for over 100 days creates a severe operational risk for the community. Vendors who are forced to work for months without compensation naturally lose the motivation to provide high-quality service.

• De-Prioritization: Vendors may prioritize other clients who pay on time, leaving our community at the bottom of the list for urgent repairs or extra care.

• Quality Decline: Financial strain on a vendor can lead to "cutting corners" or reduced service levels as they struggle to manage their own cash flow while servicing our debt.

• Relationship Damage: Trust is the foundation of any vendor relationship; forcing a partner to beg for payment erodes that trust and makes it difficult to negotiate favorable terms or renewals in the future.

The Consequence: Revocation of Authority Despite multiple attempts to expedite payment, the delays continued. On November 7, 2023, after Director Patrick Szeto failed to respond to multiple emails from management regarding the unpaid bills, the HOA Manager took decisive action.

Management documented their repeated unsuccessful attempts to contact the Treasurer and determined that sufficient notice had been provided. To ensure the bills were finally paid, they removed the invoice approval responsibility from Treasurer Patrick Szeto and transferred it to other Board members .

Why This Matters Today This historical context is critical for homeowners to understand the current state of the Board. Governance is not just about making rules; it is about paying the bills on time and ensuring the Association functions professionally.

When a Treasurer ignores vendor warnings regarding financial penalties and forces management to strip them of their core responsibility due to inaction, it raises serious questions about the fiscal stewardship of the Association's assets.

Legal Authority for this Disclosure

This report is published in the interest of transparency regarding Association governance and the expenditure of HOA funds.

• California Civil Code § 4515(b)(6): This statute explicitly protects the rights of members to use social media or other online resources to discuss "issues of concern to members and residents" and "association governance," even if the content is critical of the association or its governance. The payment of invoices, the possible accrual of late fees, and the performance of the Treasurer are core governance issues.

• Right to Inspect Records (Civil Code § 5200): The information above is derived from Association business records (vendor invoices and administrative emails regarding accounts payable). These are non-confidential records related to the expenditure of assessment funds, distinct from privileged legal advice or personnel matters.

• Common Interest Privilege (California Civil Code § 47(c)): California law protects communications made without malice between interested persons (such as HOA members) regarding a matter of common interest. The financial health of the Association, the reliability of vendor payments, and the competence of Board officers are matters of common interest to all members who pay assessments.

• Fiduciary Duty of Care (Cal. Corp. Code § 7231): Directors and officers must perform their duties with "such care... as an ordinarily prudent person in a like position would use under similar circumstances." An ordinarily prudent person responsible for an organization's finances would ensure valid bills are paid timely to avoid penalties and service disruptions. Highlighting a failure to meet this standard is a matter of legitimate governance oversight.