Accounting Treatment of Maintenance Vehcle

Started by DavidW5 • 8 replies • 1662 views

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DavidW5 (North Carolina)
Posts: 565

Posted:

Our HOA is about to purchase a maintenance vehicle (like a small, off road pickup truck) for use by our newly hired maintenance technician. I sent an email to our auditor (I'm chairman of our finance committee) asking how the purchase should be reflected on our books. To my surprise the auditor responded that the vehicle should be treated as a fixed asset on our balance sheet and depreciated. None of our other capital assets are shown on our balance sheet or depreciated. I had expected that we would expense the vehicle when its purchased, add it to our inventory and update the reserve study to include funding in reserves for its eventual replacement.

Does anyone have any insight into how this should be handled? Is there a tax benefit to depreciating it?

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Depends on how your setup and how you do your taxes. Talk to the person who does your taxes.

DavidW5 (North Carolina)
Posts: 565

Posted:

The same audit firm does our taxes. If it will save us on taxes to depreciate the vehicle, why does the auditor not have us do the same thing with all of the other capital assets of the association?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Another area you should review is your HOA's insurance policy. Our policy allowed for coverage of HOA vehicle. However, we didn't own a HOA vehicle. The insurance instead would kick in and pay the difference between what the car owner's insurance didn't pay in case of an accident with their personal vehicle. This was ONLY if the accident occurred while doing HOA business and NOT personal use of the vehicle.

This may factor into how this relates to your taxes. Although, I am not sure why the contractor your hiring doesn't supply their own vehicle. Does this mean your HOA can change maintenance contractors and still keep the vehicle under their ownership? Want to make sure how that is defined as well...

Former HOA President

SusanW1 (Michigan)
Posts: 5,202

Posted:

What other asset would function like a vehicle? Yes, it decreases in value and will last, what, 10 years? or could be sold in 6 months.

SusanW1 (Michigan)
Posts: 5,202

Posted:

What other asset would function like a vehicle? Yes, it decreases in value and will last, what, 10 years? or could be sold in 6 months.

DavidW5 (North Carolina)
Posts: 565

Posted:

Quote:

Posted By MelissaP1 on 06/17/2011 7:43 PM
Another area you should review is your HOA's insurance policy. Our policy allowed for coverage of HOA vehicle. However, we didn't own a HOA vehicle. The insurance instead would kick in and pay the difference between what the car owner's insurance didn't pay in case of an accident with their personal vehicle. This was ONLY if the accident occurred while doing HOA business and NOT personal use of the vehicle.

This may factor into how this relates to your taxes. Although, I am not sure why the contractor your hiring doesn't supply their own vehicle. Does this mean your HOA can change maintenance contractors and still keep the vehicle under their ownership? Want to make sure how that is defined as well...

The maintenance technician is not a contractor. He has been hired as a full time employee of the association. The vehicle is not street legal (it is more like a large ATV) and will only be used within the community on our private roads and extensive common grounds. It is designed to be able to drive on the grass areas without damaging the turf. It will also have a large (100 gal.) water tank on the back to allow watering of landscape features where we do not have irrigation. It will also have a removable snow plow attachment.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I am not an accounting expert at all. The expense sounds like it would fall under operational or capital. A paid employee directly from the HOA funds is a bit unusual for me as well. We found hiring contractors a better option after factoring in such expenses as medical, wage, supplies, taxes, and other expenses. Is this a 1099 contractor? Just curious of how this works myself as I had considered it for our HOA once.

Are your roads private? Our state requires license on all vehicles that drive on public roads to be licensed even if they are "golf cart/ATV". Just wanted to make sure this isn't another factor overlooked in case someone operates the vehicle and gets pulled over.

There's just so many factors here associated with this. Is this the first time your HOA has hired an employee directly? I am sure your answers would benefit other HOA experts out there who may want to consider this too. Interesting...

Former HOA President

DavidW5 (North Carolina)
Posts: 565

Posted:

Melissa,

No the maintenance tech is not a 1099 employee - he is W2 as are all of our other on-site staff (general manager, activities director, admin assistant, etc.). We contracted out their payroll and benefits administration to ADP Corp. The only 1099 employees are the folks who teach our fitness classes. We brought all of our support in house at the start of 2011, prior to that all of those functions were performed by a management company. Now the MC provides financial support only (dues collection, accounting, bill payment, etc.).

Yes, our roads are private. The vehicle will be used only within the community.

I will have to contact the auditor again and clarify exactly why the vehicle needs to be treated differently from our other facilities and equipment.

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