RESERVE FUNDS

Started by HarlenJ • 11 replies • 1807 views

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HarlenJ (Oregon)
Posts: 4

Posted:

Our HOA Director's hired a bookeeping firm to handle our accounting.
They put our Reserve Funds in a simple Saving's Account, accessible by them or the Directors. Our state laws say this money has to be in a TRUST ACCOUNT, to be used only in EMERGENCIES.
Our Directors have used these funds at their discretion to spend foolishly.
Our state laws, CCR's & By-Laws say that they can only spend 5% of the annual budged amount for EMERGENCY uses ONLY. Anything above this 5% is a capital expenditure requiring the majority of the homeowner's approval. They have ignored this.
I have in the past, taken them to an independant Mediator, assigned by the County and State and had one Director taken off the board. The remaining two directors, plus a newbie (new President) have been spending FOOLISHLY, as if the Reserve Funds are their money.
I have recently filed in Federal Court, asking the Court to Show Cause why our HOA shouldn't be put into Receivership, until new Directors can be elected.
This should be a PRECIDENT CASE for HOA's in the future to obey the By-Laws, CCR's and State Laws DILIGENTLY!

If anyone is interested, this case is in Portland, Oregon. US DISTRICT COURT.
Case No. CV-12-341-BR. Judge Anna J. Brown

JohnB26 (South Carolina)
Posts: 1,569

Posted:

+++ WAY-TO-GO +++

JohnB26 (South Carolina)
Posts: 1,569

Posted:

...you are, of course, willing to 'step up' and become a director yourself !?

...you are, of course, willing to see your 'dues' double or even triple to pay the receiver(s) and their employees !?

...easy to criticise, less easy to actually direct...

SusanW1 (Michigan)
Posts: 5,202

Posted:

If you have a Reserve Fund, then there is a plan for the spending of those funds to carry out its purpose.

Perhaps what you call "foolishly spending" of these funds is just the scheduled spending, according to the plan.

Ask to see the Reserve Plan. It should show the ins and outs for the next 25 years, at least.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Harlen,

Can you reference the law you are referring to that the Reserves must be in a Trust Account and only used for emergencies?

Typically, when Associations discuss Reserves funds they are referring to money that is collected, saved and earmarked for the scheduled maintenance and replacement of capital components. Here is link to a thread within this forum about Reserve Funds.

A Contingency Fund, sometimes referred to as an operating reserve, are funds that are saved and set aside to cover budget shortfalls, unexpected repairs and emergencies.

Since both could be referred to as "reserves," is it possible that you are confusing the two funds?

HarlenJ (Oregon)
Posts: 4

Posted:

In answer to you, JohnB26 from South Carolina, I'm willing to "step-up", as you put it and have volunteered many times in the past to no avail. I had 14 homeowners give me their proxy for voting to allow me to become a director, however the existing 3, took it upon themselves to count the votes, instead of a disinterested party and guess what? They send out the results of the votes and I received 1 vote and they received the balance. Does that tell you anything?
In the first Mediation, two of the directors are still in office and have actually commited "theft of reserve funds". I didn't want to take them to criminal court, but I'm taking them to US District Court.
As for our dues doubling or tripling, the only way this would happen is if they spent the ENTIRE amount of the reserve fund. As for paying the receivers, yes I'm willing to pay them out of my pocket, therefore no homeowner will have to pay a penny for their services. As for stating it's easy to critisise, less easy to direct, you do not know me. I critisise constructively and I sit on the board of directors of 3 major corporations, as well as directing a volunteer group within our fair city, which helps underprivileged kids, ie; positive direction with help in obtaining their goals, help with their schooling, clothing, etc.
Before you critisize anyone John, you had better walk a mile in their shoes!!

HarlenJ (Oregon)
Posts: 4

Posted:

I want to reply to SusanW1-Michigan.
The only plan the current directors have for spending the Reserve Funds, is not to carry out it's purpose, but theirs. Spend...Spend...Spend!
As far as saying what I call Foolish Spending may be scheduled spending according to a plan, let me give you an example....One director was behind in their dues by 3 months. She hired her husband, (who was just fired from his job)to rent a weedeater and cut the blackberry bushes in the holding pond. She paid him $500 to do this from our Reserve Funds, and guess what?, She brought her dues current the same day as he was handed a check.
As far as a Plan, which should show the ins/outs for 25 yrs, at least. They have never had a Plan, verbal or written.

SimoneT (Florida)
Posts: 116

Posted:

Hello HarlenJ:

Thank you so very much for "directing a volunteer group within our fair city, which helps underprivileged kids, ie; positive direction with help in obtaining their goals, help with their schooling, clothing, etc." I work as a volunteer with a center that provides services to homeless people, families and their children. G-d bless you.

HarlenJ (Oregon)
Posts: 4

Posted:

In reply to TimB4-Virginia, yes I can reference the law that the reserves MUST be in a Trust Account & only used for Emergencies.
Oregon Revised Statute (ORS)Chapter 94 (504 thru 783), our By-laws, per Article 4 (4.1 thru 4.18)and our CCR's. Also, they have continually violated others, too numerous to mention.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Harlen,

Thank you for the reference to Oregon Real Property Statute. ORS 94.595 would be the applicable section which says (in part):

(2)(b) The reserve account shall be established in the name of the homeowners association. The association is responsible for administering the account and for making periodic payments into the account.

(6)(a) Except as provided in paragraph (b) of this subsection, the reserve account may be used only for the purposes for which reserves have been established and is to be kept separate from other funds.

(6)(b) After the individual lot owners have assumed responsibility for administration of the planned community under ORS 94.616, if the board of directors has adopted a resolution, which may be an annual continuing resolution, authorizing the borrowing of funds:
(A) The board of directors may borrow funds from the reserve account to meet high seasonal demands on the regular operating funds or to meet unexpected increases in expenses.
(B) Not later than the adoption of the budget for the following year, the board of directors shall adopt by resolution a written payment plan providing for repayment of the borrowed funds within a reasonable period.

I did not see anything within those Statutes which require the funds be maintained in a Trust vs any other type of account. The only requirement I noted is that the Reserve Account/Funds are to be kept separate from the Operating Account/Funds. Therefore, unless your governing documents specify otherwise, I believe that using a savings account for the Reserves and a checking account for the Operating funds would be in compliance with Oregon Statutes.

The statute does allow borrowing from the funds PROVIDING a repayment plan is adopted by the next budget process (typically this would indicate the following year's budget).

If your willing, can you provide the specific section of your Associations Bylaws that require a Trust account?

Tim

FrankM7 (Pennsylvania)
Posts: 61

Posted:

Gentlemen, this is a great discussion and I appreciate all of the thoughtful and precise input. It bothers me that directors are, according to statements made herein, depleting reserve funds for which a reserve study may have been done to allocate the funds therein for future repair and replacement of HOA assets.

As treasurer of our association, I have precisely set forth a budget and programmed a reserve study into my database solution to provide an understanding as to why the funds are being reserved for future use and the necessity to have them continually in place. Certainly we can borrow from the account, but the subsequent budget(s) must include a payback structure.

If amounts are taken out of the reserve fund for purposes not included in our study, the study would need to be updated to adjust remaining balances for planned repairs and replacement expenditures along with needed dues appropriations from the membership so as to maintain the reserve fund as planned and approved.

Aside from having been a business owner/operator, I am also working with a non-profit, which helps those in need, in having created and continuing to modify their operating solution to interview, delegate, and find resources to help others. We have no problem in our association or in the non-profit with unjustified spending or fraudulent activity because of our programmed oversight.

Harlen, I hope you can turn around your situation and set your association on a financially sound course.

GeorgiaB
Posts: 10

Posted:

Quote:

Posted By HarlenJ on 03/21/2012 2:01 PM
In answer to you, JohnB26 from South Carolina, I'm willing to "step-up", as you put it and have volunteered many times in the past to no avail. I had 14 homeowners give me their proxy for voting to allow me to become a director, however the existing 3, took it upon themselves to count the votes, instead of a disinterested party and guess what? They send out the results of the votes and I received 1 vote and they received the balance. Does that tell you anything?
In the first Mediation, two of the directors are still in office and have actually commited "theft of reserve funds". I didn't want to take them to criminal court, but I'm taking them to US District Court.
As for our dues doubling or tripling, the only way this would happen is if they spent the ENTIRE amount of the reserve fund. As for paying the receivers, yes I'm willing to pay them out of my pocket, therefore no homeowner will have to pay a penny for their services. As for stating it's easy to critisise, less easy to direct, you do not know me. I critisise constructively and I sit on the board of directors of 3 major corporations, as well as directing a volunteer group within our fair city, which helps underprivileged kids, ie; positive direction with help in obtaining their goals, help with their schooling, clothing, etc.
Before you critisize anyone John, you had better walk a mile in their shoes!!

Hi Harlan,
I have a good idea of what you're talking about and I cheer you for your actions. After serving on several boards of directors for the past 30 years I can understand your frustration for not being supported by other members and board members just because you want to follow the laws of your state and the rules of the board.

I am afraid I will be doing what you did and I know I would have the state behind me.
Some in our HOA (not condo association) call me a trouble maker because I believe in following the law and am totally against Presidents of HOA's who use their position for bullying, shutting up members and ignoring agendas so they can pass their own self serving issues.

I finally got on the board and I find most of the other members have no clue about the 720 Florida statute. The president doesn't permit them to speak either.

This new president is being coached by the previous president who doesn't know anything about the laws or running a board meeting properly.

No president of any board has the right to tell a board member or anyone else to "Sit down and shut up!"

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