Funding of Social Committee events

I am the resident board member on a fairly new HOA, with a Social Committee that was recently created and is starting to plan events. There has been an immediate disagreement on the committee about how events should be funded, and I'm curious if there is some conventional wisdom. We have about 400 homes (650 planned) and the property management company provided a $1500 annual budget for the social committee.

Some on the committee believe the budget should be used for reusable items such as tables and chairs for outdoor events, a bingo game, etc. Small amounts could be used for children's events like Easter Egg hunts (candy, plastic eggs, etc). And some could be used for party supplies, paper plates, etc. They propose that all events should be self-funding. For instance, we could have a block party in which the Committee spends almost nothing and residents are asked to bring pot luck food. Or, if we have a trivia contest and want to give prizes, each team pays a small entrance fee that is used to purchase gift cards from local restaurants. We might even have group trips to museums, arboretums, horse races, kayak trips, etc. in which we get a bus and charge enough to pay for the expense. Sometimes we can invite food trucks, and people will pay for their food themselves, the committee would just arrange it.

Others on the committee believe the budget should be bigger, and events should always be free. If we have a bingo night, prizes should be paid from the Committee budget. If we have a block party, the Committee should pay for bounce houses for the kids, pay for soft drinks and catered food, etc.

Because the Committee is appointed by the board, they serve at our pleasure, and I have the final say. But I'm not sure what the philosophy is for these things. In particular, especially with COVID, some things like Trivia Night, or a night they've planned in which they've hired a musician to play, we have to enforce some crowd restrictions. So people will need to register in advance, with registration cut off once we reach the maximum. In that case I would think we have to charge something - both to pay for it and to ensure that people who register actually show up.

I'm interested to hear what others have been doing. TIA.

I think it's purely a matter of opinion and both sides would be appropriate and legal.

I would have no problem with functions being free as long as everyone had a chance to participate. If you have to limit the attendees then you should charge a fee to at least offset expenses. People who don't have the option of attending should not have to pay for others.

I would try to stick with the budget that the board set. Use that money for reusable items first but there is nothing wrong with fully funding events if you have the funds.

Argh, just once I'd like to cover everything in one answer...

I would recommend that your events be participant-financed as much as possible (eg. the potlucks). This helps avoid accusations that people are entertaining themselves at their neighbors' expense. Non-consumables seem to be less of an issue.

I won't even mention covid-19 and liability issues for the HOA. If people want to swap microbes, they can do so with my blessing. Just don't come anywhere near me.

"I may not participate, but anything that makes the neighborhood more attractive will increase the value of my home which, by most accounts, is the primary purpose of an HOA."

I realize people have different opinions but I disagree with the statement above. My belief is the purpose of the HOA is to keep the community in a constant state of upkeep and repair so that the homes maintain their value based on the current market value in the area. In some cases an HOA may increase the value but I don't see it as the primary purpose and in some cases may be dangerous if they are adding amenities or features that the local market doesn't want.

I think there is a difference between things like a pool or other amenities - which add value to a community and support home prices even for those who don't use the amenities - vs. events where money is spent *only* on the participants. Amenities are a tangible asset, events are not.

I agree 100%. I was just making a comment in regards to what the primary purpose of an HOA is.

Personally I am against funding a Social Committee. Let them figure out how to pay for things and maybe even have excess collection for other events.

I've been on and seen both sides of this. My current position is essentially what AugustinD indicated, "If the covenants do not say the HOA is to pay for xyz, then the HOA may not pay for xyz." And the argument that it's only a few cents/dollars per home per year is still not justification to ignore the covenants.

Social Committee events are easily funded and supported by those who want to participate. There simply needs to be good organization, communication, and advocacy for the events.

- You need tables, chairs, coolers, tents, etc.? People have those and can supply them for the event. No need for the HOA organization to buy new ones and then store, maintain, eventually replace over an indefinite period of time.
- You need food and/or supplies (plates, napkins, utensils, cups, ice, etc.)? Everyone coming signs up to bring a food or supply item. No need for the collective HOA funds (and those not participating) to buy supplies.
- You need something more . . . a DJ, equipment rental, catered meal, etc. Everyone coming chips in an appropriate amount of cash to pay for whatever is needed.

I have no problem with having a Social Committee and funding the project, if one has the resources to do so. Not all do.

From 2003-2007, we made $40K on reserve interest and used those funds, even today, to pay for events throughout the community. It was a line iyem in our budget and anyone who objected has resources to have it removed. No one has.

In regards to funding items not specifically outlined in the CCRs, that's BS. How many CCRs outline actually what amenities an association has and if there was no reserve study outline each and every one of the assets, are you saying the association has no authority to pay for pool cleaning or replace a broken spa heater or buy pool furniture?

Let me restate . . .
I agree that some CCRs do not outline all the specific amenities an association has. However, there is certainly verbiage in most (if not all) CCRs that speaks to an association's responsibility to collect via assessments the necessary money for and subsequent payment of maintenance, repair, and eventual replacement costs of the HOA's common facilities, which by definition, includes the amenities. Therefore, a pool cleaning and broken spa filter are certainly items that the HOA has authority and obligation to pay for.

Essentially yes, I am saying that they are violating covenants when/if they fund social events using association money (money gathered from assessments), unless the covenants specifically permit this activity to occur (and many/most do not). Again, as Augustin hinted at, an HOA could vaguely tie its funding of social committee activities to the vague "for the well-being of members" clauses that are also in most covenants; however, there's too much gray area in that for me, and I would have a hard time factually supporting that argument.

Don't get me wrong . . . I like social events and have been and would be an active participant and coordinator of events. But, assessments collected for maintenance, repair, and replacement of the common facilities as well as money collected specifically for other things required by the covenants should not be utilized for something not specifically supported/required by the covenants.

The example I cited was funding the social events from reserve interest, which has nothing to do with collecting assessments.

Should be easy to fund social events with a modest, expenses charge for those attending. Maybe even a pass the hat at the event. A 50/50 cash drawing.

Cite the law!

Interest on reserves is reserve money.

Reserve money can only be spent on reserve expenditures.

Money can be borrowed from reserves, but only if there is a reasonable repayment plan.

Statutes might state it a bit differently, but that's the gist of it.

This is from the Association's attorney.

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.

I use interest gained on HOA funds to pay for my boat. That's ok, right?!

As long as you are the HOA/condo manager or one of the directors, yes. Note to newbies: The latter is sarcasm. Ignore anyone who says a HOA/condo may spend HOA/condo money on things not specified in the governing documents.

So we know that funding of social events is not illegal, at least in the state I am familiar with. I have had 15-20% of the associations I have managed over the years have had some form of social events, movie nights, Easter egg hunt, Christmas lighting contest, and so on.

In this same state, budgets have to be sent to all owners annually. That budget will show if social events are budgeted and how much. The committee would have been formed at a board meeting and a budget possibly assigned. There would be minutes available to owners. Some owners may have attended the actual meeting, some might have ven volunteered for the committee itself. If a majority of the owners are not happy with the HOA funding such events they have recourse to overturn the Board decision.

Association pay for websites and they pay for newsletters. Are those items authorized by the governing documents as acceptable expenses?

I wonder how many Board of Directors, or Board members or even managers have any clue what the law of contracts actually means in a HOA setting.

Uh huh. Until the district attorney convicts, acts by the HOA Board or HOA manager, that appear to be embezzlement or theft, are also not illegal.

I feel pretty safe and won't lose any sleep at night.

I have governing docs from the late 70's and early 80's before an internet was around. Is it your premise that the funding for a website and newsletter is illegal?

So if the Board budgeted $100.00 per quarter for a movie night, and everyone was invited, so everyone could possibly benefit, how do you turn that into embezzlement or theft?

First, don't ever call me a twit. You have already called me a bit$h.

These are not hypotheticals, as I have had associations doing these movies nights for years. Based on Augie's Law of Contracts, these associations have violated your laws?

July 2020. Tim had it removed and then had me suspended for getting called the b word. Tim did the same with George from Florida. Seen him lately?

Personally I think social events contribute to the general welfare of the community and they usually comprise 1% of the budget or less so I’ve never had a homeowner complain about the expense. But if a board does not want to use association funds I have had great success getting local or homeowner run businesses to sponsor an event in exchange for the opportunity to advertise (with the usual disclaimers about the HOA not endorsing). And if the board doesn’t like that ether, I have a food truck come in to vend, and ask people to bring up their cornhole boards and frisbees. I’ve also had a community that held spring and fall flower sale fundraisers, with the profits used to fund the social committee.