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Posted By JohnC46 on 03/21/2013 4:20 PM
It has been a running dicsussion on here about spending association money on "social" events versus spending it on common association expenses only.
Some have even objected to spending association money on get well flowers to the BOD President when one was in the hospital.
I say no social budget but a good social committee might just be an income producer and if not income producing, at least a break even deal.
Emily,
You stated: "The PM is the worst, she says that in her opinion HOA money shouldn't be spent on it because it isn't the HOAs responsibility to have events."
Your PM is right. Chances are your corporate charter says nothing about your HOA being in the social activity business. It's purpose is to manage the common property of your community. It's all too easy to forget that an HOA is (most often, a corporation) a business and not a social club. Wanting to have social events in a community of people who live closely is a natural, human thing. But, it is not business. There are other ways to accomplish this.
Having an HOA sponsor (and pay for or subsidize) social events complicates matters and increases risk.
1. There are tax implications. According to the IRS, no more than 10% of the annual budget of an HOA can be spent for purposes other than to care for, manage, or acquire the common property of the HOA. Furthermore, even if you charge to attend social events, any profit that is realized becomes taxable income to the HOA. The IRS does not recognize HOAs as a social club. There are other IRS categories for that type of organization.
2. Increased liability. Check to see what losses your HOA liability insurance covers. Will it cover losses that arise specifically due to some social activity?
3. Increased exposure to lawsuit. When activities are sponsored by an HOA (a corporation) they have to be carefully planned to be sure every detail is covered. I recall one instance where a complaint was made because an HOA sponsored a holiday party in a location that wasn't handicap accessible.
This does not mean that our community does not have a social committee or social events. We have one or more events every month. However, our social committee is made up of volunteers and is completely separate from the board and the HOA itself. They have their own budget and do not receive any funds, support, or direction from the HOA. The only thing they receive is rent-free use of the clubhouse and other common areas for their activities. If any issues arise out of their activities, they are on their own. They are the community's "social club."
Put simply: don't mix business with pleasure.