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Social Committee Question

Started by ElaineI • 13 replies • 368 views

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ElaineI (Georgia)
Posts: 33
Posted:
Good Morning,
I was hoping someone could guide me on some questions. Our social Committee wants to start doing fundraisers and advertising in our Community Newsletter but we need to keep these funds seperate from the Main HOA. I am assuming we need to set up a business with it's own account but what woud be the best way to do this? Has anyone done this for their HOA?
BillC17 (Texas)
Posts: 26
Posted:
Do you really need to keep the funds separate? Our HOA recently organized a Social Events Committee and we are funding it through the regular budget, but I'm not seeing where we would be required to establish a separate account or business if they wanted to do some fundraising.
ElaineI (Georgia)
Posts: 33
Posted:
Sadly at this point in time we are not 100% trusting that the management company woukd give us the funds or tell us they received them. We fell they may decide to use it for other things and we aren't there just yet.
CathyA3 (Ohio)
Posts: 6,299
Posted:
What do your governing documents have to say about social committees and proper usage of association funds?

We've had discussions here in the past about these things. Opinions are divided on whether or not social activities are acceptable use of HOA dollars, especially if the CC&Rs don't list this. I think we mostly agreed that social events do benefit the community, but since they benefit only a subset of homeowners that it's best to make these events self-supporting (which is what it sounds like you're planning to do).

I do think the money needs to be separated from assessments since CC&Rs specifically address assessments, and tax laws may differentiate between assessments and funds raised in other ways. That's probably a question for a tax professional, though - ditto about having to set up a separate legal entity to handle the money. We don't have a social committee in my community at present, and I have no experience with them except for ours which went off the rails pretty badly (the board would have had to disband it if the members hadn't blown it up themselves).
ElaineI (Georgia)
Posts: 33
Posted:
So we have a social budget that is beyond pitiful. I guess my only concern is that I don't trust the management company to do right by the social committee and I am afraid they will use that money for other things. I know I am probably being dramitic but it's more of a gut feeling.
BillC17 (Texas)
Posts: 26
Posted:
Management companies are not to be trusted in general I agree, but surely you get a regular financial statement from them that lists all the income and expenditures? If you do and you can't even trust that, these people need to go.
KerryL1 (California)
Posts: 14,550
Posted:
I'm agreeing with both of BillC's responses. Our HOA has a scale committee and it's funded through the regular operations budget.

To his most recent, someone on your board, probably the treasurer, needs to keep track of the money your HOA is spending and the money that's coming in. Ideally the whole board should review the monthly financials so that they're confident the money is being spent correctly.

Are you on the Board, Elaine? It'a the board that will know where the funds are going. If they put all of their trust into management and do not review and discuss the monthly expenditures, you should worry about the board's competence. What size is your HOA?
ElaineI (Georgia)
Posts: 33
Posted:
Quote:
Posted By KerryL1 on 04/04/2023 10:13 AM
I'm agreeing with both of BillC's responses. Our HOA has a scale committee and it's funded through the regular operations budget.

To his most recent, someone on your board, probably the treasurer, needs to keep track of the money your HOA is spending and the money that's coming in. Ideally the whole board should review the monthly financials so that they're confident the money is being spent correctly.

Are you on the Board, Elaine? It'a the board that will know where the funds are going. If they put all of their trust into management and do not review and discuss the monthly expenditures, you should worry about the board's competence. What size is your HOA?

I am not on the Board. I just started on the social committee and when I saw the budget I laughed so hard I almost wet myself. We have 120 Homes. We don't have a treasurer only 3 people on the board which already is way small. I want to give them the benifit of the doubt honestly I do but....
BillC17 (Texas)
Posts: 26
Posted:
Usually the size of the board is spelled out in the bylaws. You should be able to obtain and see the financial statements yourself, give that a try.

Unfortunately most people who live in HOA's are completely apathetic about it. I'm the president of my HOA and I recruited all the board members, the architectural review committee, the social committee, and still trying to get some people to help me plant some flowers here and there. I'm retired so I have time for this but it is pretty hard to get folks to participate. Anyone who attends a board meeting and makes an intelligent remark is in danger of getting appointed to something.

So I congratulate you, Elaine. You stepped up. Make some good things happen.
CathyA3 (Ohio)
Posts: 6,299
Posted:
Re: the budget, keep in mind that every dollar that goes to the social committee is a dollar that is not available for things like maintaining and insuring the property, collecting the trash, cutting the grass, fixing the leaky roof on the clubhouse, and paying the community manager and the accountant for their work.

Given that many HOAs are underfunded to begin with, many boards view social activities as low priority compared with essential spending. One of the benefits of self-supporting social activities is that they won't be competing for money with higher priority items.
MichaelT21 (Arkansas)
Posts: 200
Posted:
Be aware that advertising revenue is taxed at 30% income tax, so you should only plan on spending 70% of your advertising revenue.
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By MichaelT21 on 04/04/2023 12:14 PM
Be aware that advertising revenue is taxed at 30% income tax, so you should only plan on spending 70% of your advertising revenue.

Based on what assumption? Are you a tax man?
DouglasK1 (Florida)
Posts: 2,046
Posted:
Whether Michael's 30% assumption is correct or not, it is possible that non-assessment income would be subject to income tax. The OP should discuss this with the board, and the board might want to discuss with their MC or accountant.
Escaped former treasurer and director of a self managed association.
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By DouglasK1 on 04/04/2023 12:32 PM
Whether Michael's 30% assumption is correct or not, it is possible that non-assessment income would be subject to income tax. The OP should discuss this with the board, and the board might want to discuss with their MC or accountant.

Based on experience, expenses related to income are deductible and could reduce or eliminate any tax due.

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