Unused dues

Looking for input on what other Boards do with leftover funds at the end of a budget year.

At the end of our first year as an association, we came in significantly under budget. We ended up reducing the next years dues by that amount.

Is this typical? Some say we should use it up on projects or put it in reserves. I personally feel that if the board does not use it as budgeted, it should be returned.

thank you

It can vary from state to state and from association to association.

Some states require that unused dues be returned to the members, either as a refund or to reduce assessments for the following year.

If not otherwise restricted, some associations will put the excess into reserves. Actually, you should be setting some amount aside each year for reserves to pay for capital expenditures (repairs, replacements) in later years, thereby avoiding the need for a special assessment or to borrow for those expenses. Also, you should keep an amount on hand to cover any deductible on your property insurance.

What we do is put 10% of all dues collected into a escrow account for any unforeseen emergencies that could come up. We also typically do capital improvements to the community if we have money left over.

I would be careful with reducing dues because your first year you collected more than you used. As your community ages, the maintenance costs will continue to increase to keep things looking fresh and new. By reducing your dues and then eventually trying to increase them later, you will just create issues for yourself and the other Board members.

Actually our Bylaws call for putting away a 10% escrow amount. Since we are stand alone condo sites, each homeowner is responsible for their own home maintenance, landscaping, etc. We primarily exist to maintain the lawn (mowing and fert), snow plowing of roads, maintenance of roads, garabage collection, and common area and pond maintenance.

The escrow is more in case of private street repairs or emergencies. However, since we have no clubhouse or other major assets other than a small shed, we really don't have an asset to worry about failing. As it is we have nearly $30,000 in the escrow from since we took over from the developer a little over 5 years ago.

I agree that if we were attached condos that we would want to fund the escrow with a much larger percentage.

Valerie:

Are you a board member? And your opinion would be based on ????

So in the event an emergency occurs waht funds would the board have to address this? How much in the black was the property? Was it really worth the expense of returning the unused sheare to each owner?

Most properties have and build a reserve fund to cover increasing costs of services and repairs as properties age. In many cases reserve accounts are required under the by-laws if not under state laws or lending institutions.

My suggestion take the time to learn the financial status of your property along with the possible future costs which would suggest to me dividing excess income on a yearly basis is unnecessary and unwise.

We maintain a list of "to do" items with estimates ready to go. If a budget surplus becomes apparent we pick a few items to take care of. If not, we move the excess to reserve and spend it on something next year. We do have a fully funded reserve for any replacments or repairs, you should to.

After one year of association activity, the money should go into reserves by board vote. If you tackle reserve fund savings, and create the "tradition" very early to build them, you'll always have financial capacity to maintain your property. It won't stay new forever.

However, it's perfectly fine to lower dues in response to over-budgeting for regular budget expenses. Of course, I assume that your budget also had the prescribed amount of reserve funds being deposited that keep you fully funded or close to it.