Community Parties.

I held quite a few community parties. My number 1 rule was never ever use the HOA's money. It didn't mean we did not use the HOA resources. That was that we opened up the clubhouse/pool area to use. Normally, it was a $15 rental fee for residents to rent. We'd waive those for HOA use just like we were having a HOA meeting.

Found it best to have a pot-luck style with all the interested members who want to participate to be involved. That is because using the HOA funds means taking money out of ALL the members pocket. Which doesn't set well with those who don't want to participate in such things.

The same goes to Neighborhood Watch type events. NEVER EVER EVER NEVER EVER co-mingle funds with the HOA for such community like events. A good block party is a great opportunity to get to know each other. Just don't force it down anyone's throats.

Any social events held in my community are never funded by the HOA. Donations of food (potluck), money, or whatever are used.

Haven't had a "party" in more than 15 years.

Finally have a new owner who is willing to put something together. (When an individual volunteers around here, we usually let them run with it. It's such a rare occurrence.)

We allocated $500 from the board's discretionary fund. At least 40% of that will go toward renting a tent.

We don't expect any complaints about the expenditure.

If it builds better relations within the community and gets owners to see board members as real people, we think it will be a cheap investment in general goodwill.

I would disagree with Richard's approach of using reserve interest - Reserve interest belongs to reserves and has technical restrictions that are different than operating fund use.

IMO, money in reserves (INCLUDING any money earned on those reserves) is dedicated EXCLUSIVELY to reserve activities.

On the other hand, if you earned interest on an OPERATING account, that interest goes into the OPERATING fund (and use of those funds are not restricted the same way as reserve funds).

I would ask a reserve specialist. Without exception, the reserve studies I've seen factor in the projected income from reserve interest.

Ok then, ask CPA.

While ultimate responsibility does rest with board, it does not mean that they can make up their own accounting rules.

Personally, I think you open yourself up for liability if you use spend reserve fund interest on parties.

Don't need to.

Income from reserve investments stay in reserves.

You don't get to mix and match monies in the operating and reserve accounts in whatever way you please.

We budget quite a lot for social events in our urban high rise setting. The last two years, we've, imo, funded way too much and I voted against the amount. But a board majority approved it. These last two years also have seen a huge growth in participation by residents as we have a really active, creative Social Comm. at present. High rises all around us also use this method.

I too think these are the glue that bind us tougher and give some residents a sense of belongingess & community. Our memberships on other committees has grown too and I believe we can directly attribute this to high morale--a good sense of togetherness. The only complaint we ever had was when the budget was smaller so $10/person was charged for the major summer event, that's mainly catered. An Owner asked why he should pay for that When he's paying out of his dues. We had the SC stop that practice

This year, there'll be 8-9 activities, 2 of which are potlucks. We'll also have 3-4 "Movie Nights" in one lounge that usually only draws 20-25 residents--the older folks, who aren't as active in the nightlife scene all around us. The light supper & soft drinks cost the HOA about $30.
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We've had three (don't ask!) different companies do our reserves studies in 5 years. All three included the interest from the reserves accounts in the studies. With NpS, I too see it as part of our reserves, which only can be used, per Civil code, for items included on the reserves studies that will need major repair or replacement.

When the analyst estimates we'll be xx% funded at the beginning of the year, he is calculating our reserve accounts' interest into that estimate. I'd like to see the exact Civ. Code that Richard refers to.

In California, Civil Code §5550(b) discusses how an association is to come up with a funding plan. There is NOTHING that that says how interest is allocated.

I could have sat back like most board members and did nothing. But me and a couple of board members took the extra steps. We pushed to install Smart irrigation controllers. In five years the association has SAVED $350K in water costs.

A group of people wanted social activities in the community. Without raising a penny in dues, we held 8 events per year for three years. We came up with a investment strategy that substantially increased our interest earned per year. We used part of the interest earned to offset our annual contributions., thus never funding from our reserve account. We also set aside 10% aside as an emergency fund, kept in our money market account. Any amount left over was then allocated to reserves the next year.

While all this was going on, we had reserve studies done by reserve "specialists". We were 173% funded, yet, and without any anticipated outlays from reserves were told we should DOUBLE our annual contributions.

Today, there is no social committee, no events, dues were raised, investment strategies thrown away. The only thing they couldn't change was the irrigation controller, BUT I am sure they are trying.

I commend you on your accomplishments and I acknowledge your disappointment that a later board reversed good policy decisions.

The question remains whether the accounting is done in accordance with generally accepted accounting principles as required by 1365(c).

5550(b) sets the minimum standard for what goes into a reserve study.

But 1365(c) sets the minimum standard for how you account for funds, which includes whether you can or cannot use reserve fund income for non-reserve purposes.

Even if you do comply with 5550(b), you still have to comply with 1365(c).

I would not supply coffee, cookies, or snacks even at our HOA meetings... I think community events should be just that... COMMUNITY. With that said, the community is made up of owners and renters. If you want to get them all together, then best to use everyone's best strengths. Which is cooking, bringing supplies, or donating money...

We had an annual Halloween party every year. I organized it based on the fact if we got all the HOA's kids together, then they could go in one big group. Plus members who were not going to be home could bring the candy to the clubhouse. Members would also know who kids were "ours". Which could help in identifying who belonged or not. The only HOA money involvement was having the clubhouse open.

Kerry,

Please go back and read what I wrote. We NEVER used money from a reserve account for funding social activities. If anyone would know better, I would.

Not sure what the point was in telling me what the requirements for spending and borrowing from a reserve account are?

Since you like citing from this website, here is THEIR opinion of using reserve interest,

"QUESTION: How is interest on reserves treated? Can interest be transferred into the operating account or does it have to stay in the reserve account?

ANSWER: The Davis-Stirling Act does not regulate how interest is allocated. Governing documents generally do not address the issue either. However, reserve funding plans usually allocate interest. If the funding plan assigns interest to the reserves, then it must stay in reserves. If the funding plan is silent, the board may transfer accumulated interest into the operating account.

Better question, how many HOA's actually have a reserve funding plan?

Our funding plan, signed as a Board Resolution stated that the monthly reserve allocation would be short funded by the anticipated amount of the monthly reserve interest earned. You wrongly assume I did nothing to reduce the percent funded. This plan was set at 10%, which met the requirements of the lending institutions. You slow down the increase, you don't reduce income because when you do have to raise it, it become more difficult and some people may think you didn't think it all the way through.

What a CA CPA knows as far as HOA, well, that is a different animal in itself.

Essentially identical.

Also interested in your answer to Kerry's question on how your reserve specialist dealt with income earned on reserve funds.

Oh, I get it. You, as a Property Mgr., conduct the studies yourself for your clients. I'm very aware that a socialist or analyst isn't rewired in our state.

Think we'll stick with someone who's certified. It's not a part of our contract with our MC. I guess you have a special extra contract for the various levels of studies?

Where did I say I did the studies for my clients, or do you make up things as you go? I know what a "specialist" does, do you?

Do not accuse me of something I never said.

Exactly what does a "socialist or analyst isn't rewired in our state" mean?

The 173% funding was NOT my doing, but those of the "specialist". I guess Kerry feels they are more qualified than I am. If it works for you, go for it.

1. Excess reserves can't be given back to homeowners as it doesn't fit the bills of what the intended purpose is.
2. As you know, interest earned is taxable income. There may be tax consequences by returning excess funds to homeowners, but I haven't encountered that. I chose, at the time, to gradually wind down to acceptable levels.

To make it perfectly clear, I was referring to solely to the community in which I lived and served in.

Understood that money can't be given back. Is there any requirement to reduce assessments when reserves exceed 100%?

Never can have enough legislation to prevent people from using common sense.