Director’s Rational for Blocking Treasurer’s Audit

In an email addressed to Diamondhead Country Club and Property Owner, Michael Bennett, four directors of the Diamondhead Country Club and Property Owners Association stated their reason for blocking a forensic audit ordered by the Treasure of the same organization.


TO: Mike Bennett
FROM: Don Crosby, Craig Harvey, Marshall Kyger, Paul Montjoy and supported by Kelsey Johnson, Donald Silcio, and Sharon McCulley

Mr. Bennett:

We have read your email reacting to information sent out by the “Alliance for a Better Community”. We cannot sit by and not respond to the falsehoods in their communication nor your reliance upon them.

First, let us state that none of us, that is Crosby, Harvey, Kyger and Montjoy, object to an audit in principle. Rather, we object to the fact that Mr. Schaefer (1) exceeded his authority; (2) acted in a secretive, underhanded manner without consultation with the Board of Directors; and, (3) violated POA policy on procurements exceeding $5,000.

We believe Mr. Schaefer exceeded his authority. We don’t believe any Director has the individual authority to hire or contract without Board approval. Section 5.4 of the Bylaws “Duties and Powers” states, “The Board of Directors shall have control and management of the affairs and business of the Corporation. The directors shall in all cases act as a Board.” Section 4.6 “Treasurer” defines the duties and responsibilities of the Treasurer. It does not state anything about ability to hire a forensic auditor but does state, “The Treasurer shall furnish to the auditing firm appointed by the Board of Directors…”

This clearly indicates that it is the Board that hires auditors.

Secondly, POA policy has long required that any procurements greater than $5,000 be competitively bid.
Mr. Schaefer completely ignored this requirement.

All Directors are entitled to, indeed expected to, ask questions. Certainly as Treasurer, Mr. Schaefer has every right to ask financial questions. However, even beyond the requirements of the Bylaws and POA Policy, there is a protocol that should be followed. That is, he should ask the question and inform the responsible Board Committee (he was largely responsible for establishing these) and give the POA staff the opportunity to answer his questions. If not answered satisfactorily, the next step would be to refer them to the outside auditor already under contract and selected by competitive bid. If, finally, that review did not provide satisfactory answers, then, and only then, should we consider hiring an additional outside auditor/consultant and use a competitive selection process.

What happened is this auditor showed up with no notice and demanded to sit down with Club employees one-on-one and interrogate them. It was not clear to us what the purpose was of many of the questions. At a minimum, this caused significant disruption of Club operations and significant angst among Club employees. This is intolerable.

The Club does operate at a deficit which is made up by member dues. It has always lost money and always will. It is an amenity and all of our amenities require support from member dues. This is the purpose of dues. It does remain our objective to improve operations at the Club to reduce the required subsidy and steps are underway to accomplish that objective.

Don Crosby, Craig Harvey, Marshall Kyger, Paul Montjoy

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About the Author

T. R. Alfonso

Editor and Publisher of the the Diamondhead News Online