Use of Received Assessments, Legal, Late Fees, and Interest Income

I would like to be able to use all money that comes in toward our budget. My thinking is that we paid $11,731.98 in legal fees last year. We would be more comfortable with legal fees if we can use the legal fees collected this year towards this year’s budget. We would be more comfortable writing things off, if we can use dues and fees towards this year’s budget. With the explanation below, that means that if we spend money on atty fees, even if we are recovering fees from the previous year, we won’t be able to use it towards this year’s expenses.
A previous board members understanding of how our assessments are calculated are as follows:
2014 Dues = Used to enforce budget
Previous Years Dues, Late Fees, and Legal Fees = Miscellaneous Income that can be used for whatever the board decides such as funding reserves or a special project. Her neighborhood did this and was able to replace all of the mailboxes in the neighborhood.

If this is not the case, please explain to me how we should be using our assessments. Thank you!

The Budget should not be an absolute. It should be a good guideline.

We incorporate a miscellaneous line item in our budget as well. It is designated for unexpected minor repairs, make up shortages in other budget items. It also acts as a buffer between paying bills and collecting assessments. We also start each year with an amount equal to approx 1.5 months of normal expenses (contract obligations, utilities) in the checking account. This also acts as a buffer/contingency fund to cover expenses while waiting for assessments to be paid.

We do not separate payments we collect this year for last years assessments. They all just go into the checking account. (however we do separate next years assessments collected this year) At the end of the year:

if assessments collected = actual expenses we start with the same amount in the checking account next year that we had this year (typically $3,000) plus any prepaid assessments for next year.

If assessments collected < actual expenses we start next years checking account with the difference between the $3,000 and the shortage plus any prepaid assessments for next year.

If assessments collected > actual expenses we transfer the difference to the Reserves contingency line item and start next years checking account balance with the $3,000 plus any prepaid assessments.

Clear as mud ??

I've attached a copy of our budget summary. Hopefully it will help illustrate what I'm trying to explain.

Additionally, since the budget is a guide, the Board will adjust the line item budgeted amount as needed. For example: this year, we obtained an additional $6,000 in savings as an incentive for signing a new contract for trash/recycling. The Board then adjusted the budget (shifted funds between line items) to utilize these extra funds to address drainage problems on our roads. Most Boards have this authority. However, you need to check your governing documents to be sure that your board also has it.

Legal fees collected are when we send someone to an atty for collections or covenant violation cases. The HOA pays the atty, and then the homeowner pays us back.