Funding Reserves properly

Have you asked the BOD if this is what THEY authorized.

In addition, it sometimes takes a couple of months to get the bank accounts settled transiting between management companies.

The board doesn't have a clue about accounting and just goes with whatever the MC wants even if it's wrong as it has been sooo many times.

I realize it might take a couple months before their system is set up properly. My concern is that they want to penalize the Cluster reserves for amounts that are still in A/R each month.

I agree that it would be prudent.

However, it's not a requirement.

I understand your concerns.
I believe I understand the situation.

To address this you need to do one or more of the following:

1) Get back into the good graces of the Board so they listen to you.

2) Gather support about the issue and raise a fuss at each and every Board meeting (squeaky wheel type of thing). It can't be just you.

3) Gather support and remove Board members who are not sympathetic to the issue by recalls or simply not reelecting. Of course you also need to find others who are sympathetic to the issue willing to serve.

4) Consult with an attorney to see if what has been done is actionable or would simply be considered a bad decision under the business judgement rule.

Linda,

Gathering support is not easy and it doesn't happen overnight.

It's time consuming and requires educating the membership (it took me over three years before things started to change).

Those who support but don't want to be in the limelight can give you proxies, they can show up at meetings with you even if they don't speak (it's still a show of numbers).

Those who support and don't mind being vocal simply need to be encouraged to ask questions.

Perhaps a neighborhood tea or wine and cheese party to discuss the issue with other cluster members can get the ball rolling.
At the very least, perhaps you will make a few friends.

Tim,

The 2016 budget has $6,684 for bad debt expense and in the past this varying amount has not been adjusted monthly but is adjusted by the CPA during the annual audit. This is also how adjustments(if any)to the Cluster Reserve should be handled - not by the MC.

1) Tracking the deposits to CR will be so much harder if the MC starts messing with the amounts.
2) There is a large probability that MC calculations/numbers will be wrong.
3) This makes so much more unnecessary work because when late payments are made, entries will have to be reversed.
4) Current month receipts cannot be evaluated until the 1st of the following month - so CR deposits will always be over a month late.
5) Late payments are not a bad debt until written off by the CPA during the annual audit.

If the MCs had done things properly in the first place, the $350K wouldn't be missing from CR and there would be no need to raise CR dues again for their STUPID mistakes. I was hoping this new MC would be better than the past three but they may even be worse.

Besides this new scheme of decreasing the CR accruals (never done in over 30 years with MCs)the MC accountant made several errors in reporting the financials at the last board meeting.

Save us from the MCs and attorneys!!!

Tim,

I've learned as much from this site that the board has the final responsibility.

But the MC and attorneys often makes unwise suggestions and the board relies on their "expertize" with a bad outcome.
And the MCs disregard the board's orders and then lie about it to CYA!

Some examples:
1) When an amendment to our Declaration didn't pass, the board thru the attorneys' suggestion, took the homeowners to court to get it passed that way. The judge ruled in favor of the HOs for two reasons: there were enough objections to overrule a court-ordered change; but most importantly, the attorneys didn't read the Colorado statutes correctly and were mistaken on the percentages to go forth in the first place.

2) The board instructed the MC to follow the city's water restrictions for the greenbelts but they did not. (SEE ATTACHED REPORT FOR DETAIL)and later lied about it using different excuses like lightning messed up the timers, etc. The outcome was a huge water bill that included a $54K penalty, charged 60% to clusters' domestic water use. Later the city waived $43K of the penalty but the MC never gave that benefit to the Cluster account. In fact, none of the higher amount nor penalty should have been charged to clusters in the first place because it was the greenbelt over-watering that caused the additional expenses.

3) Board approved work for: concrete sidewalks ($4,800) jog trail ($7,700) parking lots ($6,790) to be paid from General Reserves; and Asphalt ($15,135) to be paid from Cluster Reserves. But the MC being too lazy to allocate the amounts properly charged the total $34,425 to the Cluster account - $19,290 too much. This has happened over and over.

4) After I informed the board that the Cluster monthly deposits were not being made, the MC informed them that they were, showing them the accrual to prove it and the board believed it. However, the MC was wrong - now $31,675 short year to date.

I'm not privy to the attorneys' excuses. But the MC usually blames it on someone else (like the landscape company)or says that the correction will be made - when in fact nothing is done.

OK - so the board is responsible for the incompetence of the attorneys and MCs. But isn't this why we pay their fees - because they are supposed to be the experts - professionals and reliable.

Sometimes we've had a board member that has accounting experience but currently this board doesn't have a clue!

RE: the side note: I know how budgets work and I only pointed out the budget for bad debt expense because you stated "it appears that your board failed to allow for past due accounts." They are allowing for it, just on the whole.
I normally don't pay much attention to the operating budget unless a dues increase is put forth; then I feel that the board should have to justify their numbers. But the Reserve accounts are another issue!

I am going to have to etch this into my brain. Seems that the board never holds the attorneys or MC accountable, except through firing sometimes years later.


This is very commendable on your part. And I think it's so much better coming from you than from a MC that seems to get the different HOAs and their requirements mixed up.

I suggested that the board have a notebook that could be passed forward through the years with the most important documents and rulings listed so they wouldn't have to scour thru all the different documents where its hard to some things. They are always going to the attorneys (sometimes the same ones) for the same opinion that was given a few years before (like property boundaries in the common area)

Are you the treasurer of your HOA? If so, do you decrease contributions to reserves based on late dues payments?

NOTE: I am trying to do the "quote thing" more than once in this post. I apologize, in advance, if I mess it up.

Did you actually start such a notebook or simply suggest it?

I've found that many are willing to approve something if they don't have to do the work.

Did you start such a notebook just for the Treasurer (as that could have been done without Board approval)?


I am currently serving in that position.
I've also served as the Associations President, Maintenance Officer, Secretary, newsletter editor and on the Association's Architectural Committee. I'm currently maintaining the Associations website as well as serving as Treasurer.


Even though we start with a zero based budget (i.e. income = expenses), we plan on a $3,000 (equals one month of normal expenses) minimum balance in our operating funds (ie checkbook). This covers shortfalls due to bills received before assessments are paid and can cover (to a point) delinquent accounts.

The actual starting balance of the operating fund is adjusted upward based on receiving advanced payments (payments in December for the following year) and downward based on the amount of delinquencies we have on December 31. Anything over this adjusted amount is transferred to the Reserves Contingency line item (which is used to offset miscalculations between expected vs actual expenses on reserve items).

We also have a miscellaneous line item (typically $1,500) in our operating budget which is used as an additional buffer for budget shortfalls. This amount may be adjusted up or down each year based on various factors (increase/decrease in delinquencies, keep the budget increase within the range the Board may set without membership approval, expected small maintenance expenses that wouldn't be charged to the reserves, etc.)

Therefore, my Association may have more leeway than yours in meeting expenses while covering delinquencies.
Additionally, my Association is (knock on wood) experiencing much better delinquent rates than many Associations (for example we've only had 2 accounts go over 90 days but one of those went to collections and I have a court date on the 10th for that issue).

To more directly answer your question, if I could not cover a shortfall by other means, yes I would decrease the actual contribution to the Reserves for that year (but carry the shortfall over to the following year(s) so, hopefully, it will be brought current). This is basically borrowing the funds to cover the shortfall.

I know, that's not what your Association did.
Your Association actually adjusted the budget so only $x goes to the reserves vs. the amount initially budgeted. I wouldn't do that. However, my Board might if I was unable to properly explain the issue to them.