FL HOA - IS DEFICIT SPENDING OK????

Can the board of directors approve a budget that spends more than it takes in in current income? The board believes it has had as much as $18,000 in "operating funds" over the past 2 years and has refused to pay for an annual audit or professional reserve fund analysis. We do not have a line item on our monthly assessment to fund an "operating fund." I have raised the question at board meetings and I have been ignored. I am concerned that no one can account nor do they seem particulaly concerned about the source of this money. I suspect it is because prior managers have misallocated or not allocated at all the reserve payments that are built into our assessment. The board has used the funds over the past 2-3 years to fund pet projects and to avoid having to really explain to homeowners that our fixed costs exceed the income we bring in. The board has been against telling the homeowners that just to keep even we would have to raise the assessment more than 3%. The board has congratulated itself on not going over a 3% annual increase because to do so would require homeowner approval.

Now the FL legislature has passed some new requirements to assure that reserves are properly funded. The board has sent around 2 proposed budgets, one "fully funded"; the other "partial funded". Of course the fully funded will increase the monthly fee by approx. $40 and possibly more if we really did a reserve analysis. Isn't this a "hidden" problem and isn't it likely to grow exponentially until we have no choice but to do a special assessment? Any suggestions on how to explain to homeowners what has been going on and what may happen in the future?

Isn't proactive, full disclosure part of the board's fiduciary duty? This board takes the position that any homeowner can request to see the financials. Is this sufficient?

Liz, I know that Florida Statute 720 requires HOAs to distribute an annual budget with some financial reporting and that the level of detail is based on the number of houses and/or the annual budget. Show them the statutes.

On the other side of the issue it might just be percieved deficit spending. I know there are several items in the budget that we never end up using the full amount. I also won't budget for late fees as I don't want anyone saying that we are charging them that just to meet the budget. So between those two things you might have more money than than the budget suggests. However, just as I would not budget late fees I would not budget to spend money I don't have.