BOYNTON BEACH — A 2021 audit of Nautica, a gated Boynton Beach community of 336 single-family homes, has found “significant deficiencies” in its financial controls that could leave its homeowners association vulnerable to mismanagement and fraud.

The audits, conducted in 2020 and 2021 by the accounting firm Hafer, noted that the HOA did not have a conflict-of-interest policy or “a fraud response plan.”
   

Andry Fuentes, another resident of Nautica, complained to The Palm Beach Post about the lack of transparency by the HOA and said he, too, is concerned about what the audits have revealed. Berman said a detailed forensic audit should be undertaken to ensure that money have been properly spent.

Nick Skarecki, the HOA president for the past 15 years, said Berman, a homeowner at Nautica, has been a disruptive force. Berman says all she wants are records she is entitled to receive.

Audits from 2018, 2019 and 2020 also found problems. The 2018 audit reported: "The president of the Board of Directors of the Association is the owner of a landscaping company which is one of the Association's vendors. Amounts paid to the vendor for the year ended Dec. 31, 2018, were $49,046." Audits in 2019 and 2020 arrived at similar conclusions. During the three-year period ending 2020, the landscaping company received nearly $160,000.

The financial records were provided so late to Hafer that it did not file its 2021 audit until January of this year. As a result, Hafer said the audit was filed late because some of the records it needed were never provided. And the records it did receive were provided well after its deadline.

Skarecki told The Post that the previous management company failed to provide the needed financial records, and that was why the HOA received audits that cited it for serious deficiencies. He noted that the 2022 audit was "clean." It did, however, find that the HOA has not been fully funding its reserve, which is used to pay for capital improvements and repairs to existing facilities.

Was it a conflict of interest for board president to have been paid by the HOA to do lawn work?

The question of whether the lawn work was a conflict of interest is fuzzy, according to Josh Gerstin, a Boca Raton lawyer who specializes in HOA and condo law.

Gerstin noted a state law pertaining to not-for-profit corporations such as Nautica says a conflict exists if a director is involved in a transaction in which he or she is "financially interested." He said the conflict can be overcome, though, if the director discloses the conflict to other directors before a vote is taken. The contract also must be "fair and reasonable."

Skarecki said he disclosed his interest in his landscape company to the board and did not vote on the resolution to award the contract. The same held true for the vote to award work to his relative's management company. He noted that initial management contract in which the relative's company was chosen occurred prior to his being elected to the board.

Skarecki said the HOA acted properly. He noted that Nautica's bylaws specifically allow the board to hire a director to perform work for the association.

Despite what the audits reported, Skarecki said they contained "wrong information" and that if The Post published the audit findings, "there would be consequences." Skarecki acknowledged that there was no effort to correct the audit findings, something that he said he is now going to do.

"A member of the board of directors is the owner of a landscaping company which is one of the Association's vendors. Amounts paid to the vendor for the year ended Dec. 31, 2020, were $50,400."
 

2020 AUDIT OF NAUTICA HOA

As for the bylaws saying that directors can do business for the HOA, Gerstin said state statute would preempt them. Aside from the legal issue, Gerstin noted it is not a good look for the association to hire a director to do work.

"The potential loss of confidence from members and the contract’s susceptibility to challenge are good enough reasons to search for another vendor. One final concern to consider is what happens if the vendor does not perform and needs to be sued. That would put the board in the position of suing its president."
What are some of the other findings from auditors from 2018 through 2021?

Other findings include:

• The board has not contracted with a reserve specialist to conduct an independent study to determine when HOA facilities such as the clubhouse and recreational facilities need to be replaced. The failure could lead to special assessments.

• Board members failed to review bank statements.

• The association uses gift cards as a form of payment in lieu of petty cash. No records existed to monitor their use.

Neither Skarecki or his relative's management company are currently doing business at Nautica. The June 30 financial statement shows that nearly $900,000 is deposited in bank accounts.

"We are in great shape," said Skarecki.