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How deep must one delve?
We received a package and federal schedules A&B were omitted.
Does one proceed without A&B or does one kick the package back to the buyer?
But, even without the real A & B, the interest amount reported in 2008 on the 1040 is incongruous with the amount reflected in the money market account as submitted in the buyer's "balance sheet", e.g.; substantially incongruous.
This gives rise to the assumption that a late deposit occurred in 2008 of a vast sum of monies. But where did the money originate? It was certainly not earnings and it was especially not from investments in 2008.
Does one ask the buyer to provide a signed IRS form that allows the IRS to release one or more years of tax records directly to the co-op.
How far does one pursue the seemingly less than substantiated sudden appearance of “cash”? Does one report suspicion of money laundering or tax chicanery to the government?
In this day and age where does the co-op’s legal responsibilities end? Does the co-op have any responsibilities to the government in any such matter or scenario?
Just asking?
Ditto Board Prez's comments. The Board's fiduciary duty is to its shareholders/the corporation - not the US government, the IRS, or any other body.
Seek full financial disclosure to protect the co-op's interests; if it's not forthcoming, reject.
Board Prez - Yours was such a helpful response. Another factor we've encountered was with our management company, which wasted everyone's time and the coop's money, by sending us copies of an application package that was incomplete and, without realizing that, we interviewed the applicant. Of course it had to go back for more documentation and another interview. The application still did not have full supporting documents and for that and other reasons the person was turned down.
In this case it started with the property manger -- that person should know better than the volunteer board if an application is complete. If there's sloppy or inept work on the part of management, then the coop suffers. But that's another topic altogether.
Riverdale, I'm glad our experiences were helpful. If it does not already exist, have the managing agent or someone on the board who is most familiar with the process, create a check list for the application. Until there is a check mark beside each item and a sign off at the bottom, the board should not move forward with an interview.
Another idea...use a couple of board members as a financial review committee (or ask the property manager) to summarize the application on a single page with the most pertinent information including sales price, financing, income and asset requirements - only facts with no editorials. That review will make it easier for the entire board to review the application and will disclose if anything is missing.
The fact that you interviewed a second time suggest that you were discussing the financial portions of the application at the interview - a big no-no. The interview is a chance to meet the applicants face-to-face but should NEVER be used to discuss finances. If you have to reject an application for financial reasons and you have already met them, you may inadvertently open the corporation up for legal action, particularly if the applicant is a member of a protected class.
Good luck!
SidZ - If your coop doesn't know where funds came from for a buyer's deposit on a sale, also consider that it may have been given to the buyer by his/her parents as a "gift" or a "loan". Or it could be from an inheritance or a trust fund. This income could affect the buyer's tax filing. It wouldn't involve your coop but might answer your question as to where funds for a deposit on a sale came from. If so, ask your coop attorney if you can request proof of this from the buyer.
I would ask for written documentation of the source of the deposit. The reason is that it could be a covert loan from someone, with an equally covert, undisclosed agreement to pay the money back, which could affect your assessment of the adequacy of the applicant's income to meet the maintenance on the apt. I wouldn't take general verbal assurances as a substitute. If it's a loan, talk to your lawyer about how you can protect the coop against a future covert repayment agreement.
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You should not review any package until it is complete with all of the documentation that your application specifies, including all of the required schedules from income tax returns.
If the applicants are unable or unwilling to provide the requested information, the board should vote to reject the application.
The same holds true if documentation is provided but does not make sense. When we receive an application that does not fully explain where the funds are coming for the deposit, the balance due on closing, or the required income we will direct our property manager to ask the applicants for clarification. If the applicants are unable or unwilling to provide enough additional information to satisfy the board's questions, they should do their fiduciary duty and vote to reject the application.
As to your legal responsibilities, they lie with the corporation and its shareholders. The fact that an applicant may be unable to satisfy the questions of a co-op board does not mean that the applicant has done anything illegal. It is completely out of the scope of your responsibilities to involve the corporation in accusations which could result in costly legal actions against you and the corporation.
Bottom line - unless the board is comfortable with all of the information, reject the application and move on.
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