Common? Treasurer prepares budget with no input from other directors.

Do they actually do the books themselves or report what an accountant does? Our Treasurer happened to be the accountant. Other HOA that position is just a figurehead.

I do not see reimbursement as an option. It only lends to people perception that dues are set too high if get money back. Even if it is a dollar.

Expenses for an HOA should not vary that much every year. Should be the same thing. It may be the projects or emergency event may effect it.

It is to spend as much as it collects on its required operational expenses. Unless doing something different in years pass should be same old same old.

ElleN and Melissa make great points.

Our property manager drafts most of our budget, but the board will review the line items and make changes before the final draft is approved. When I was on the board, our policy was to transfer excessive funds at the end of the year to reserves (that only happened two or three out of the 10 years we were on the board because our delinquency issue always had us ending in the red). That would make more sense than a resident vote - giving the money back sounds good, but most folks only think about their own pocketbook and forget the association budget has to meet the association's needs for EVERYONE.

As for the questions, actual expenditures can be different than the budget. Remember, the budget is a guide at best and sometimes there are unexpected expenses, the budget you set for a certain problem might run over because the vendor discovered other problems no one could have anticipated - and yes, there may be waste. Just like your household budget - and you haven't forgotten inflation, have you?

Take a good look at the year-end income/expense report, and note which line items were way out of budget. You might want to compare those lines to year-end budgets for the last two or three years and note if there's a pattern, and then you can ask why. The board should be looking at those numbers to see what might need to be done to control costs - sometimes, opening bids to three or four potential vendors makes sense. If you have a long-time vendor, perhaps you should ask if you can negotiate a two or three-year contract where the costs can be locked in for that period or not exceed a certain rate hike.

And if you're at that meeting where this is discussed without comment, what's stopping you from asking questions yourself during the resident forum? You might not get an answer, but you can make the observation that it's odd that the budget was approved without comment from the other board members. That doesn't necessarily mean that's a bad thing, but you'd appreciate hearing from other board members regarding their opinions on the budget - if nothing else, it helps show they at least looked at it.

Great point.

Sheila, I believe the excess budget question is a federal one, an IRS rule, and that the board is required to get a vote from the membership even if the membership agrees with the board on where to put the surplus.

Terri, Regarding the excess (surplus) operating funds:

I am in WA. As treasurer, I do a reconciliation every year to calculate surplus operating funds and the board votes on what to do with it. We have always voted to add it to our reserve fund, as it is not yet fully funded. Our state laws leave this decision to the discretion of the board, unless the governing documents say otherwise. My association has always used the 1120-H tax form.

I was worried we've been doing this wrong, since you said you think it is a federal rule to get a membership vote, so I looked into it a bit more, as a layperson with no special education on taxes. It looks to me like an association that files an 1120-H does *not* have to have a vote of the membership for excess funds. I checked ElleN's link to the Davis Sterling page about Excess Income Resolutions and it appears to say the same thing for California--if your association files an 1120-H, no excess income resolution is needed, though many associations apparently do it anyway, to cover themselves.

Perhaps someone with more tax knowledge can help us clarify.

Then ask your accountant - don't guess. And recheck your documents - if they're silent on the matter ( and many aren't that specific), you can talk to tbe association attorney and a tax accountant to see if an amendment to the documents clarifying the matter may be necessary

ElleN

While I have always liked your posts, my belief in you has risen as you admit you made a mistake. We all do but few admit it and move on. You are a class act.