Board transfers money from special reserve fund to operating account.

Hi everyone

The HOA board transferred money out of a special reserve fund to the operating fund to pay the Insurance bill.

Special Reserve Fund - This was for Repair and Replacement of siding only.

Board didn't take a vote by either the board or members or do the proper papers to make it a loan from the reserve fund.

I've done some research and think this makes it income when put in the Operating fund for a Non for Profit.

I also can't find any papers that show that the HOA doesn't need to file with the IRS every year. I'm told we don't need to. Only, filing is with the State and that is every so many years I think it 5 or 7 years. This comes from the Attorney!

Insurance policy went up by 2 thousand dollars this year and the new board was left with a drained Operating fund from the Truck lawsuit the old board lost. I think they left with about $300 dollars in the account and Insurance and Landscaping coming due.

Thanks,
Guy

I am not sure about the rules as they apply to HOA's in Ohio, but borrowing from the reserves is not an uncommon practice.

In California, HOA Boards, if they do borrow from the reserves, must vote on that action in an open meeting and MUST have a plan to repay within 12 months. A short term special assessment might be needed and should be part of the plan.

It is not income, going from the reserves to the operating. For the most part, reserves are funded from the operating account as a expense line item. Interest on funds, whether operating or reserve, is subject to taxes. HOA's must file taxes with the IRS, either as a Corporation or Homeowner Association. State rules are state specific.

Hi Jared

That is wrong and should be done the right way.

Thanks,
Guy

they may penalize you a portion of the money that you do not owe

{xyz times zero equals zero)

they 'generally' choose not to pursue non-filing if no money payable (either way)

HOWEVER

the law requires filing annually - the attorney is guilty of malpractice (if actually quoted accurately)

GuyM1,

-- How do you propose the insurance bill be paid?

-- How do you propose the bill from the truck lawsuit be paid?

-- What do your governing documents say exactly about Special Reserve Funds? What legally requires the board to use the money in the Special Reserve Fund only for siding?

-- Weren't you recently elected to the Board? Are you still on the Board?

-- Regarding making complaints about attorney conduct: My understanding is that the various state disciplinary boards generally act only when the complaint is from a client of the attorney's. I believe state disciplinary boards are particularly averse to acting on a complaint from someone who was in a legal conflict with the attorney's client.

You're not the client. The HOA is. The difference is significant.