CA: How to calculate Board allowed spending?

Started by RobinB6 • 6 replies • 1586 views

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RobinB6 (California)
Posts: 38

Posted:

Hi all...this is hopefully an easy question. 😊 If our Board is allowed to spend $5,000 without HOA membership approval how is that calculated? For example... if there is an item that would cost $4,000 up front, but then requires a monthly fee to maintain of $100 which would then equate to more than $5,000 for the fiscal year is that not allowed? Is the monthly fee calculated into the total cost or would the Board be allowed to spend this based on the initial cost of $4,000? Thank you!!

LarryB13 (Arizona)
Posts: 4,099

Posted:

Robin,

It sounds like you have The Bylaws From Hell.

Five thousand dollars does not buy much anymore. Your board is not going to get much done if every expense of $5,000 or more must be submitted to the membership for their approval. Why even bother with having a board if every modest expense is subject to member approval? This is an incredible waste of resources.

Do you have an annual budget approval by the members? If there is something in the approved budget that costs over $5,000 is the board still required to seek approval to spend the money that the members already approved?

I hate to say this but you are not doing yourself or your association any favors by trying to expand the scope of what needs to be approved. If you want to improve your association then work to get rid of this provision that allows members to second-guess virtually every board action.

RichardP13 (California)
Posts: 3,868

Posted:

Robin,

Where is the $5000.00 coming from? If it is a special assessment for a capital assessment, they can raise the funds UP to 5% of the annual budgeted expenses. Capital Improvement items should be added to your reserve study and and monthly maintenance added to your budget. An easy example is if the association wanted to put in street lights that overall costs $4000, but required a monthly maintenance contract of $100.00. The lights would then go into the reserve study with what would be useful remaining life. If it is 10 years, you need to now set aside an additional $400 annual to replace them when needed.

If it was already approved in the budget, no further approval would be necessary.

If your annual BUDGETED expenses were $100,000, the Board, without membership vote, approve a special assessment of $5000.00.

Hope this helps.

KerryL1 (California)
Posts: 14,550

Posted:

Robin, please give us the exact wording of the $5,000-limit sentence and what document it comes from. Is it from your CC&RS?

DouglasK1 (Florida)
Posts: 2,046

Posted:

Without seeing the actual wording, my guess would be that the limit would be per budget year, not for the potential life the new component.

Escaped former treasurer and director of a self managed association.

KerryL1 (California)
Posts: 14,550

Posted:

It's not clear, Douglas, that Robin's referring to a reserves component. It might be an operation budget "item."

TimB4 (Tennessee)
Posts: 21,059

Posted:

Robin,

It's only an easy question if the full citation for such authority is provided. The devil is in the details as they say.

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