The Board of directors and how they can spend money

There is no edit feature...

I need to edit the second paragraph, it should read.....

Often our BoD will justify not doing something our by-laws provide, like NOT sendING a notice out about a meeting, using the justification that they just saved us $150.

Chris, an HOA's operating budget does not confine expenditures to stay within each line item. Rather it provides guidelines for expenditures. We provide a cash flow chart which includes the budget broken down by line items, ANTICIPATED income and expenses, and the yearly approved operating budget by line item. This can be used by the Board to monitor income and expenses throughout the year.

As the year progresses some items will exceed their budget while others will be under budget. No big deal unless the variance is high. At the annual meeting those with a high variance should be explained and the next year's budget is adjusted accordingly.

Neither is the Board confined to stay within the total annual budget. Sometimes there are unexpected expenses which must be paid. However, non budgeted voluntary expenses should be held to the minimum. And if income is much less than budgeted then some voluntary expenses should be delayed. In other words the Board needs to manage income and expenses in a prudent manner.

You said "there is a very strict process that the BoD must follow when spending our money". I do not agree. I think the fiduciary responsibility of the BOD is to make sound business decisions. Your post suggests to me that you have never served on an HOA Board. If not, do you have a personal budget? If so, would you delay having a life threatening operation if the budget does not list it? I doubt it. Likewise, you should not buy a new car without the money when you can not afford it. YOU SHOULD USE SOUND BUSINESS JUDGEMENT!

Hi Chris:

If your documents and/or state laws require notice of a meeting, then if the Board does not provide the notice according to what legally constitutes notice, it may be possible to legally challenge any decision made at that meeting. Check your state laws and your documents regarding what is required notice (for instance, in my state [Oregon] email is not considered legal notice).

A budget is simply a spending plan. It's a best-guess estimate on how much the Association will be spending on the various items that are mandated in the documents or required by law; and then the assessments are set to cover the expenses. If, in a previous year, the income exceeded expenses, that income may be available to the board to spend in a future year (depending on documents, etc.) or may be figured into the next-year budget to reduce assessments, or rolled into the reserves...

What IS important in a budget is that all expenses are reported in the category in which the spending occurred - so that an accurate budget may be set up for the following year. "Hiding" an expense in another category usually guarantees that a budget will never be accurate.

J. Patrick Moore, CMCA

What has been written in previous posts makes a lot of sense. I need ideas on how I can help ensure the Board has some method of oversight, without tying their hands and making Board members afraid to take action when things need to get done. When community attends board meetings members attend public BoD meetings some members demand things that are unreasonable, but because the rules are not entirely clear, we end up in a virtual log jam.....Nothing is getting done. Our board is terribly fractured. I feel the only solution is for the BoD and the members to understand the process, and as I stated I would like to identify and document the process. I am running for the BoD so I can attempt to pass some of these proposals, but before I sell the community on the idea, I want to be sure I know what I'm talking about.

I am including some of a power point presentation that I have created that illustrates what I believe the process the board must take when voting on an issue or proposal. It is read only, so click the read only button when you open it.
I would like to tie it into the fiscal process, but it seems that that process is not as definable as I thought.....

It seems to me if we have large surpluses in some areas and short falls in others than the BoD should be allowed to pay for them using the surplus, but what I don't want to see is large surpluses turned into unusual or unnecessary spending.

For example, a past President decided that the HOA should pay for everyone to have cell phones. Now there are those that will argue both sides of that issue, I would just like to see the Board have to justify those types of decisions, at the very least have to include that as a line item for people to see.

I want to make sure that the Board of directors is doing the business of the majority in a way that the majority approves.

By defining the process more clearly, we actually help the Board. As it stands now many Board members have been afraid to take action they were perfectly justified to take, and others have taken action they should not have because many Board members don't understand the process.

Thoughts?

I wanted to address this comment separately....

I have never served on a BoD that is true....I hope that will change here shortly. I am very aware of the fiduciary responsibility of the BoD and hope I don't come off as a community member that wishes to micromanage my BoD. Quite the contrary....

I want the process to be as clear as possible so that members of the community don't end up fighting the BoD (or members of the BoD fighting amoung one another) and the entire process ends up deadlocked (as it is now). I want the BoD to feel as unrestricted as possible within a reasonable set boundary. In VERY unusual circumstances the BoD may need to look to the community for clarification.

I admit I am not entirely clear on the budget process, what you wrote makes some sense....

I think there is a difference between mandatory and discretionary spending. I think that I should have stipulated that mandatory spending and discretionary spending would be treated differently.

Thank you for helping me sort this out.....

Also, I would be interested in any fiscal processes that you use and would be willing to share.

Did the "united community" study the budget line item by line item to completely understand the need for the increase?

The community elects the board to make decisions, and the community has the right to ask for reasons for an action, but not the right to micro-manage. It sounds as if the board made a decision, the community didn't like the decision, and complained; then the board decided that the board's decision was correct and proceeded with their action.

If the community has studied the budget thoroughly and determined that the entire board was negligent, then they have the right to recall all the directors.

Just be careful what you ask for because you may get it, and then you have to live with it. So, do you have 7 community minded, devoted, qualified people with no personal agendas ready and willing to step in and take over? If not, then the united community should step back and take a close look at what will happen if you recall a full board without having qualified replacements.

Also, if the board has been deligent and you begin a recall process, they may all decide to just resign and let you have it since their work isn't appreciated.

This is playing devils advocate because I have no way of knowing whether the budget increase is necessary. It's meant to be constructive advice to really be sure you know what you're getting into when you work to recall an entire board.

I hate it when "voting out the entire board" is a solution to the problem. Who else you going to get to serve in their place??? If your going to vote out a board, you had better consider that there has to be other people willing to takeover. It's not an easy job and it isn't a paid position. If your upset about the way things are run then be willing to be one of the people willing to step up and fill the board slots.
The sad truth of HOA's is that the people who run them are the one's willing to run them. It isn't the people who sit back and point out flaws. They are the ones who's willing to live with their flaws and keep doing business.

Chris, this really does appear to be micro-managing.

How do you know that the "majority" does not approve of the boards actions? Have you personally spoken to 51% of the community (that understands the process) and they have told you they are unhappy?

Why should the members define a process for the board? The board was elected to run the business of the community. If the majority doesn't think they are doing it properly then they should be voted out as the elections come up and new members voted in.

The Power Point attachement you showed is a very elaborate, and potentially confusing flow chart for what is a very simple process.

When the board makes a decision, that decision is final and they do not have to reverse it.

If the members want to ask the board to reverse it, then the very simple process is to ask them at a meeting to reverse it. If they refuse, then a member may solicit a petition among the membership for signatures. The members should be provided with clear and convincing evidence that the board is in error in their decision. If 51% of the community signs the petition, then it can be presented to the board. The board can still decline to reverse their decision, or they can reverse it. It's their choice. The procedure is that simple.

It is the board's decision to make. Members have a right to ask questions about the budget in order to have a better understanding. But the board has the duty and authority to develop a budget and work with it.

You've stated that you don't know how budgets are worked with once they are developed. It's also possible that you don't know what each of the line items consist of and how the amounts of the line items were developed. That's why you should ask questions of your board for clarification and your own education.

But when you try to reverse the budget when you are not well versed on how budgets work, and when you develop such an elaborate and unnecessary flow chart to have the board follow, unless the board has asked you to do that, then you are micro-managing.

Yes, I am the president of our board and I have spent a lot of time studying our documents, all applicable state and local laws, reading HOA text books, and taking HOA type classes so that I have a complete understanding of how HOA's and boards should operate, and understand my duties and responsibilities as a board member and presdent.

I have worked with project type flow charts and electronic flow charts, and I understand them. The flow chart you presented is completely unnecessary. No matter which way you work your way through it you come up with the same choice that was available at the top. Not everyone is familiar with flow charts and they can be confusing to those who aren't familiar with them.

You have done a beautiful job of developing the flow chart in Power Point and I commend you for that. However, the bottom line of the chart is this:

If the community favors a decision, nothing is done.

If the community doesn't favor a decision they ask the board to reverse the decision.

The board will act on the request, or say no.

It's that simple. Why complicate a simple thing?

If you exect us to understand your situation, then you need to provide us with the details up front, such as a quote from your bylaws that the board is not adhering to.

If you go to the community that's what you have to do. Print out the Bylaw section(s) that is being violated, then specify each item that the board has done to violate each section of the Bylaws.

What does your Bylaws say about appointing committees. Normally it is the President who appoints all committees. S/he names the committee members and the committee chair, and someone writes a charter for that committee. The Board votes to approve the charter and the committee that the president has named. Your Bylaws may be different.

In November our board made a decision to modify something on our common property. There were no community members in attendance. We had discussed that issue on our web site, in newsletters, and in previous board meetings, and never received any input from the community.

After the modification, two members complained about the mod. They came to the meeting and asked us to reconsider. We assigned a committee to review the project to see if it really was a safety issue, as the two members complained. The committee reviewed every aspect, including asking the city to look at the original play plan and stipulations, and the old and current building codes applicable to this issue. We violated nothing in the building codes or original stipulations, and recommended that the board not reverse the decision.

Two people still complained. Instead of telling them the issue was closed, we told them that if they brought us signatures from 51% of the community who want the decision reversed then we would consider it again.

Then even asked if we polled the community before making a decision. We had to tell them that if we poll the community on every issue, then we could not get anything done. The Board meeting is where discussions are held, and decisions are made. Members should attend meetings in order to make input into decisions. By complaining afterwards, they are trying to micro-manage our decisions and costing us a lot of time that should be spent on other projects.

No flow chart was required at all. Keep things simple. The community members you speak with will have a better understanding of the issues if they don't have to sit down and figure out a flow chart that only complicates what is a very simple matter.

Voice of reason says to get a professional managing Agent if your HOA Board fits the criteria listed in Melissa's post :)

Chris, you don't have to agree with me. You asked for "thoughts" and I took the time to give you mine.

Yes and if I came off as unappreciative of your comments, let me say thanks for your input.....

Brad,

Thanks for the reply...

I think the point is that the association has to be the balance to the BoD.... My thought is that if a person takes to time to start a movement can can convince enough people to call and sustatin the special meeting process then they deserve to be heard. The bottom line is that if you can get 70 or so households to support almost anything then it must be pretty important.

Lastly, its not a question of agreeing or disagreeing. I just want the BoD to follow the "rules" and stop changing them as they go along. Each BoD sets certain precedents. The BoD my have the best interest of the HOA in mind...But there is always the chance that another BoD may not....

I would just like to see a process established.....

Chris:

I understand what you are saying, but it is a bad idea IMO to let your homeowners be involved in the day to day decisions of an HOA. Speaking from experience, seven board members have vastly different opinions and ideas, throw another 200 people into that and you will never get anything done. If your homeowners had veto power you will get less and less volunteers for your board. IMO why would I bother serving on the board if everything I am working is decided by the people.

I know you want checks and balance, but your checks and balance are open meetings, meeting minutes, your covenants that can not be changed without homeowner approval and the ability of the homeowners to recall board members if they do not like the job they are doing. That is more power than the American people have, we can't recall George Bush if we feel he is doing a bad job, we have to wait 4 years for an election.

I hope I am not coming across as belitting, that is not my intention. I think instead of trying to work on what you are doing now, volunteer to help the association and you will get on the inside of how decisions are made. Granted there are horror stories out there, but most boards try to do what is right.

Excellent response William. I think some people just like to complain; that's easy. And many complainers, are not doers; that takes time and effort.

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I am one of those complainer but not because I like to but because of the need. I was on the Board but resigned (which I reqret) because the CC&R's were not being followed and nothing was getting done. I was out voted every time by the other two Board members who didn't want to do anything. We have had control of our HOA since Jan 26th/2006. Had elected five(5) BODs, three resigned, with no replacement being done because the two Board members have better control. They did appoint a VP but he is just a warm body to make a quorum. When I was on the Board, it was I who met w/the Lake doctor, landscaper, MC. It was I who found out about the many delinquents (30) and 6 were nearly two years delinquent. I ask the MC to get agressive in collecting these accounts. We still have the same six(6) uncollected but it was I who finally got the liens served. I tried to get all the right things done for the good of the community. I Suggested a newsletter, even wrote one but the President didn't like it, so it was scraped and there has never been one. I suggested a Welcoming committee, I thought it would be the proper way to get HO's involved and interested in their community. This was never done. It was I who told them we needed to draw up a fining schedule, to put some teeth in enforcement of the violations, this was never done. We have yet to have our annual meeting which was to have been in mid Jan.

As I have stated in many post, our community looks awful. We have yellow rust stains on the homes and fence to our entrance. Our park is a disgrace, 30 + dead bushes (or there were, now we have holes, they just pulled up the dead one). My husband and I have personally worked on the park four (4) times. When we went there two months ago to work we found they had taken out all the borders around our plant beds (they have still not bee replaced) there was nothing wrong w/them except for a few warped landscape timbers running down the path. The swing was broken, laying on the floor of the gazebo. We took it and had it fixed and replaced. Our fountain has been broken for ten (10)months. Our pier needs a few boards replaced. We only have the Lake and the park, no pool, no tennis court, so little to maintain but has not been done. I heard they want to remove all bushes and path to the pier and just sod the the whole area. Our park was beautiful, alive with color when I purchased, I want this back not just sod because it is easier to maintain.

I did volunteer to come back on the Board but was turned down, they don't want me because I want to do things the right way, the way the CC&R's call for. Plus go the extra mile to keep the HO's informed. We have no committees because they don't want any. I do all I can on my own. If I see something thats needs being done I do it.....so you can't tell me that complainers are just like to complaine. And you can't tell me that this Board are just volunteers and are doing the best they can. I feel volunteer or not, when you take a position, it is your responsibility to learn, read those Docs until you know them inside and out. It has been said many times on this forum that if the dues must be raised to do these things, then it is their duty to do so. They are not running a popularity contest here by not doing so but are suppose to be keeping our property values to the standard they should be.

This complainer has every right to complain.......By the way I don't even live there. Myself and only two(2) other HO's have taken it upon ourselves to clean up and repair the jobs that we can financially afford to do.

Believe me Rodger, I reqret every day that I resigned. I know I was a good Board member, I did everything because the other Board members said "we both work and we don't have time". I was glad to do it because I did have the time and loved it. It is very hard for me to meet HO's because I don't live there. I only know the few HO's that attend the meetings and more than 50% are rentals with absentee owners. The ones I know agree with me but will not open their mouth. "I don't want to get involved". I have certainly ask for some vocal support. I intend to run for the Board again, if we ever have our annual meeting to elect new officers. I am hoping I can collect some proxy's from those absent owners....It's hard to get my ideas out there when so many HO's are not there and the others don't get involved. I did pass out the budget to some HO's (our Board only gave them to the four (4) HO's that showed up for the Budget review. Shouldn't the Board have at least sent the Budget to ALL HO's? It is things like this that I felt different then they did. I wanted the HO's to be informed...We use to have 10 HO's (77 total) attend our few meetings but after seeing nothing was ever done, they stopped coming. If I fail getting re-elected or theres no a new turn over of the Board, then my only recourse is to sell if I can. We have homes that have set there for months with no buyers. We have such a small little community, theres no excuse why it was allowed to get in this condition.

Beverly,

It's always nice to hear that a group of concerned members can actually follow the necessary procedures to properly make positive changes in their Association.

The only advice I would offer you is to continue your active solicitation of proxies for your annual meeting. Otherwise, the membership might consider the issues resolved with your initial election and if they don't show, you might not be re-elected.

I would also suggest that you review the management companies contract. It's possible that they might not have been able to resign for no reason and would have been required to stay in place.

Tim

Check the actual wording on the proxies. If the proxy specified an exact meeting date, I designate xyz to be my proxy at a special meeting held on abc, vs open ended; I designate xyz to be my proxy for all meetings of the Association until mm/dd/yyyy then the proxies could probably be challenged if used for a different meeting. I know that State law typically allows the proxy to be valid for 11 months. However, that would be depended on any conditional statements within the proxy.


Your Bylaws should specify. If they do not, then have the Board pass a resolution requiring two signatures on all checks issued. We use the following wording:

"All checks issued by the Association shall be signed by two (2) Officers of the Association. "

Then have all directors sign the signature card. You will need a statement from the secretary of the Association saying when the meeting took place and who were elected as the new directors. We passed an order of Precedence for the required signatures in a resolution:

Treasurer, President, VP, Secretary, Maintenance, Director.

This way, if the Treasurer, President, etc. take vacation, checks can still be signed.

You should also work on amending your Bylaws requiring the two signatures. This way a future board won't be able to easily change it without membership approval.

Tim

P.S. You might want to start a new thread for any other questions. That way others with similar issues will be able to find them easier.