Should HOA pay for neighborhood parties

Started by RenaeW1 • 40 replies • 8477 views

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RenaeW1 (Florida)
Posts: 42

Posted:

Our covenants are ambiguous as to whether it is okay to pay for neighborhood sponsored parties. I would like to see what your opinions are in this area. Here is what the covenants say:

Purpose of Annual Assessments: The assessments to be levied annually by the association against each lot shall be used as follows:
a. to repair, clean, maintain, provide utilities and reconstruct when necessary, the common areas, including entrance monuments, gates, and amenity area being of benefit to all lots;

b. to pay all ad valorem taxes

c. to pay the premiums on all insurance carried by the association

Okay, here is where the problem lies. There is another section that reads like this:

General Assessment.
a. Purpose of Assessment. The general assessment levied by the Association shall be used exclusively to promote the recreation, health, safety, and welfare of the residents of the properties and in particular, for the improvement, maintenance, and operation of any common area and facilities.

I take this to mean that by paying for improvement, maintenance, and operation of common areas helps to promote the recreation, health, safety and welfare on the existing common areas we have, such as the pool. If we didn't clean the pool it would be unsafe. If we didn't clean the bathrooms it wouldn't promote the recreation of using the pool.

Others on the board take this "promote the recreation" of the residents to mean paying for neighborhood parties. If you do pay for parties, where does it stop? Maybe one person wants a keg party while someone else is offended by alcohol. Maybe someone else wants to pay for blow up slides and pony rides, while someone else doesn't have children.

Please help!

KirkW1 (Texas)
Posts: 1,665

Posted:

Well, promoting recreation can mean many things. And I honestly believe the author intended this to be a very open statement. At the same time, they wanted clearly wanted the primary
purpose to be upkeep and/or improvement of the common areas.

Many people are against HOA sponsored parties. Many HOAs find that parties are the lifeblood of the organization. The biggest single request that I hear from residents is for a block party. They want the HOA to play an active role in helping them meet and get to know their neighbors.

The fact is that we have "evolved" into a society where we are so structured that we find it hard to become friends with the neighbors. But the power of a block party is strong.

You do have a valid point of where does it stop. And my view is host a couple block parties a year. Or host National Night Out, and support non-HOA block parties. For instance, you could make coolers, tables, etc available to residents hosting a block party. After all, there doesn't seem much point in having every block buy their own stuff.

The cost would be buying the stuff and storing the stuff. But residents hosting block parties could reserve and check out coolers and tables. Maybe even a awning or such. This way you promote being neighbors (not just people who live near each other) and yet minimize the expense to those who choose to not participate.

RogerB (Colorado)
Posts: 5,067

Posted:

The HOAs I am involved with all feel having community sponsored events are an important function. They are one of the most effect ways I know of to combat apathy. And apathy is the number one problem for most HOAs. That being said I do not agree with having the Board use more than 3 to 4% of the budget expenditure for these events.

SusanW1 (Michigan)
Posts: 5,202

Posted:

One could argue that WHEN THERE IS MONEY LEFT OVER, it could be used for other activities. (The bylaws use the words "primary" and "other."

BUT . . . .The quoted bylaw section basically gives the Board the power to establish a committee that would cover all these "soft" activities - recreational, etc. This committee could have a small budget and the rest could be donated by the residents or other group that wants to contribute to it (our sub. has October bake sale and Fall Festival, mostly donated items)

These activites are not expected to make a "profit" in fact, even breaking even would be nice. The goal is to build a sense of community within your neighborhood.

MikeS1
Posts: 668

Posted:

We spend about $300 for one annual party at the pool and the rest comes from local retailers in terms of physical contributions. Residents bring one pot-luck dish or desert. In turn, the retailers get some good press in the newsletter and recognition on the website.

The annual meeting is a great way to get the neigborhood together and it's been real effective in terms of squelching non-truhs that are circulated by some of the usual troublemakers. It's really improved communication channels and has helped bring everyone together.

One or two parties shouldn't break the bank, but I'll grant you several years ago; this was way out of control. Right now, with all the increases in contracts, vendor increases, surcharges for fuel, etc; we've had to bump the assessments significantly for the last 3 years. It just wouldn't be right to spend a lot of money on parties in light of the budget, the economy, foreclosures, etc. Things are tight right now.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

What about "parties with a purpose?" I think tying in something like the annual members meeting, National Night Out against Crime, a reception to welcome new board members and toast the outgoing members, or a new resident welcome party make sense to me. Or, you could invite your state representative or city councilor for an update.

I would suggest that spending up to, say, five percent of the annual expenditures on social activities would not be out of line. For some associations the amount would be less, and for others with pools or similar amenities, it might be more.

JohnK3 (Pennsylvania)
Posts: 967

Posted:

Renae,

We usually have an anuual block party, or did until this year when nobody wanted to organize it. We would not fund it because it was only of interest to some of Membership.

Having said that, your docs probably allow you to.

You might want to poll Membership beforehand to test your HOA's level of interest.

TamaraW (Ohio)
Posts: 193

Posted:

We have small functions. Polling the homeowners would be a great idea, this way you could make sure you are giving them what they (majority)want. Some of our functions show small interest and we just don't do those again. I think we may do a poll ourselves. Good idea!

RenaeW1 (Florida)
Posts: 42

Posted:

Thank you everyone for your responses. Those are some very good ideas. When our developer still had control of the neighborhood, we didn't have any parties that were paid for, we just had potluck parties and everyone just brought something to share. So, I was just wondering if that was okay to spend money on parties. We do have some funds left over, but I was pushing for a reserve fund; maybe we can do both.

SusanW1 (Michigan)
Posts: 5,202

Posted:

What do you mean?
"We do have some funds left over, but I was pushing for a reserve fund; maybe we can do both."

At the beginning of the year, do a BUDGET - BASED ON PROJECTED COSTS. That budget should get you through the parties that you have planned out. There should not be a substantial amount of money left over in that budget.

Remember, at the end of the year, you "0" out and submit the next year's budget. So either spend the money at an end of the year bash OR plan better.

I am assuming that your "budget" is a line item from the HOA budget. We have $1,000 in our Social Fund. We have had movies etc once a month for the kids, and a huge Fall Festival with hay rides, bake sale, etc.

RenaeW1 (Florida)
Posts: 42

Posted:

"What do you mean?
"We do have some funds left over, but I was pushing for a reserve fund; maybe we can do both."

We are all very new at this. When we took over the HOA from the developer, we shopped around for services such as getting our grass cut at the common areas. We found a company to do this for $3000 less than what the developer was paying. So we did have some funds left over. I want to start a reserve fund with this money, but am meeting with some resistance.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Renae - the definition of a not-for-profit is that there are NO "left-over" funds at the end of the year.

At the end of the year, it is hoped that the expenses vs. the revenues (income from dues)are very close. (a small emergency fund and other small funds are allowed. There have been many discussions on this on this board before)

If you want to START a social fund - to be placed on the budget as a line item - then when the Board does the budget, you must submit a plan and justify its importance to the community. Expect a fight if this is a new concept.

Your HOA should also have a Reserve Fund (note the capital letters) which is not the sme thing as when you talk about a reserve. Be careful not to use that word to describe "left over money"

Good luck. You are charting new waters here. Expect a bumby ride.

If all else fails, start up a group of women who want to do what you want to do and work outside of the HOA budget.

DwightT (Idaho)
Posts: 664

Posted:

We have an Activities Committee with an annual budget of $2000 (a little under 2% of annual assessments). The committee organizes an Easter Egg hunt, a 4th of July parade, National Night Out BBQ, a Fall Festival, and a Holiday Decoration competition. We established the amount as a line item in our budget when we took over from the developer 3 years ago. These events have been a great way for neighbors to get to know each other.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Quote:

"the definition of a not-for-profit is that there are NO "left-over" funds at the end of the year."

Here again, we have an instance of incorrect, inaccurate information being posted as purported fact. I can find no definition of a not-for-profit organization that even comes close to such an ill-conceived statement.

It is not even a useful working definition.

If we follow the convoluted logic proposed in this statement, then General Motors is a not-for-profit corporation, since it lost several billion dollars last year and this year. Indeed, it has less money left-over.

As a point for consideration, State Farm insurance (the last time I checked) is the largest not-for-profit corporation in the U. S. It is a mutual insurance company run for the benefit of its policy holders. It has lots of funds "left-over" at the end of the year that it returns to its policy holders in the form of (I hate to use the word) dividends or that it uses to boost its reserves.

Not-for-profit does not mean charitable. Nor does it mean non-taxable.

Not-for-profit means that the entity is organized specifically not to make a profit that inures to owners or shareholders. It has nothing to do with how much money is "left over" at the end of the year. A corporation may be a not for profit if a substantial portion of its income derives from members who are also the primary beneficiaries of the products and services provided by the corporation.

GloriaL (Georgia)
Posts: 195

Posted:

I have been reading this thread with great interest as our BOD just rejected funding a "Fall/Halloween Party" geared towards the children with rented jumping things and such.
When our Community Enhancement Committee was developing this event, it was to be a "user fee" event, but when the person who would be hosting it brought it to the BOD, she was seeking funding (minimum of $500-$1,000 of our $8,200 yearly budget). At our last Annual Meeting, the Social Committee was disbanded due to lack of participation, and social funds were removed from a line item in the budget. The Community has consistently voted down any increase in annual dues. The BOD was considering some funding if more than a majority of families participated. The sticking point happened when the hosting HomeOwner stated that the Event would be open to HomeOwners PLUS their other family members and friends NOT from the Community. Discussion went back and forth. I, for one, could not vote to spend our minimal HOA funds on events attended by people who do not live in our Community, and who contributed no dollars to the Event.
The BOD voted unanimously not to fund the Event since no line item exists. The BOD decided to put funding Social Events on the Agenda at our next Annual Meeting for vote by the Community. Needless to say, the HomeOwner who wants to host this event was annoyed that she would have to fund it privately if she wants to go ahead.
My question: How does your HOA fund events attended by non-residents of the Community? Or do you fund them at all?
Does anyone use a "user fee" concept for funding Events? How do you monitor who attended and who paid?
Any thoughts would be appreciated.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Gloria, I think you are on target with your thoughts on this. Spending money on social activities is a reasonable expenditure, I believe. But if money is tight, it may not be the wisest use of funds. Also, when funds get tight, funding social activities ought to be the first to go.

I think your board made a wise decision. I do believe spending $500 or $1,000 out of an $8,000 budget is an excessive indulgence. Maybe $50 or $100 would be more appropriate. Certainly, no more than, say, five percent of the budget should (in my way of thinking) should go for social events.

Our neighborhood has a couple of social events each year funded by the association. They are "parties with a purpose." And we have numerous block parties in which neighbors who attend either pitch in or bring a contribution to help offset the beer and hot dogs one of the other neighbors purchase. I have never heard of any problems--it's all on the honor system.

And we don't seem to have an issue with non-residents free-loading at any of our events. If someone is visiting a neighbor, I think they are more than welcome to attend. But then again, we don't advertise the events outside the community, or encourage non-residents to join in.

FrancescaM (Washington)
Posts: 264

Posted:

It truely is one of the only ways to combat apathy! I don't believe there is anything wrong with having social events by the HOA. However! Fundraising, garage sales, donated items are a huge part of our events...

TimH1 (Alabama)
Posts: 17

Posted:

Our HOA has a Social Committee, who are alocated a set amount of dollars in a budget annually (currently $2,500 of a $57.500 annual budget). They make their own decisions as to what to fund in regards to social activities, but have always done an annual Easter Egg Hunt, July 4th BBQ at the pool, Halloween party and the annual Holiday party. They also provide "welcome baskets" (baskets with trinkets, costing under $20 each) to new residents. They added a "wine and cheese tasting" party this year (although they charged admission). All events are held at our clubhouse. Never been much of an issue for us, since all residents are invited and encouraged to attend, although we did discontinue providing alcohol at the holiday party a few years back, due to liability concerns. We did have a few nay-sayers who complained early on, but they have been silent of late. The old adage of "don't like the way we run it? Vote us out and do it yourself" ALWAYS APPLYS.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Geez George - take a break!!

The original poster used the words "left over".

She thought she could use the "left over" budgeted monies from one line item for her start-up project.

My verbiage was used correctly in responce to her verbiage.

RenaeW1 (Florida)
Posts: 42

Posted:

I'm confused. Can we use funds left over at the end of the year to start a reserve fund?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Renae,

When you say reserve fund, exactly what do you mean. Most of us here think of an reserve fund as a special fund set up for the purpose of saving money to be used for future repair, maint and replacement of capital assests, i.e., walls or fences; clubhouse, pool, tennis court, roofs and repainting buildings (for condos), street repairs (if your streets are private), landscape upgrading, etc., etc. However, a reserve fund can also mean a special fund used to subsidize the operating fund in an emergency situation -- this is often called a contingency fund.

If you are thinking of a reserve fund for capital repairs, maint. and replacement; then the board should first have a reserve study done. The study will determine exactly what assests are covered and the amount of money which should be deposited into the reserve fund each year.

If you are thinking of the "reserve" fund that is more commonly called a contingency fund, then you can just deposit the excess monies, no type of study is required. However, the BOD should have a projected amount and a plan for what type emergencies this money would be used for.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Renea - there are NO "left over" funds at the end of the year.

The NEW budget starts from scratch and all committees need to submit their budget. The NEW budget is made and passed by whatever assembly (board, members) who has that power.

Just because the landscaping committee did not spend all of its %6,000 budget, it does not mean that there is a "left over" amount that you can use for your project.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By SusanW1 on 09/28/2008 4:43 PM
Renea - there are NO "left over" funds at the end of the year.

The NEW budget starts from scratch and all committees need to submit their budget. The NEW budget is made and passed by whatever assembly (board, members) who has that power.

Just because the landscaping committee did not spend all of its %6,000 budget, it does not mean that there is a "left over" amount that you can use for your project.

Susan,

If the total income for the year was $100,000 and the total expenses for the year was $90,000 there is a net profit of $10,000, or what Renae is referring to as "leftover funds"! Plain and simple. These "leftover funds" (which are added to the equity of the assn) either stay in the checkbook or are transferred into another account, such as a reserve account. And, yes, these monies could be used to fund a reserve account. Just deposit the money in a separate bank account and show it as a transfer to reserves (a debit to the Reserve Account in the income section of the balance sheet).

EdieL (Virginia)
Posts: 86

Posted:

We also have social events paid by hoa funds. However out of 250 lot owners, only
the same 20 lot owners attend. They are the same 20 that are tied to always
socializing with the BOD. Unless the BOD is able to find a way to get all
members involved, I say no to the HOA funding for these events. When our BOD
schedules a social event, they do it by e-mail. Out of 250 lots only 60 are on e-mail.
Edie

GloriaL (Georgia)
Posts: 195

Posted:

When your HOA does fund an event, are outside family members and friends of the Membership allowed to attend?
Has anyone used a "user fee" type of funding?
How do you monitor who attends and who has paid?
I do get the impression from posts here that 3-5% of the annual budget for yearly expense of Events is adequate. However, as our Annual budget is just under $8,500, then that allows merely $255 - $425 for the total year. That is less than was requested for one Fall Event (which was denied). We have no line item for Social Events (it was removed at the last Annual Meeting) and increases in Dues have been voted down consistently.
I think that taking a poll of the Community to see if they would be willing to increase Dues to put funding into the budget for Social Events next year mihgt be a good way to go. I believe that the Community thinks our small budget is adequate to cover all expenses PLUS fund a Reserve Fund (which is just being inititated after I have been fighting for it for two years) and still has lots of dollars left for Social Events (Easter Egg Hunt, 4th of July, Fall/Halloween and also Christmas). Maybe we should just print some money in the basement....
If we do decide to go ahead with a poll, how do we word it?
Do we include a line item list of the present budget so Members can see where the dollars go/have gone?
Do we ask if the Membership is willing to increase the Annual Dues to fund the
Social Events?
I'd sure appreciate your learned help.
Thanks.

DwightT (Idaho)
Posts: 664

Posted:

Gloria -
If the HOA is going to provide money for events, then it should be a line item in the budget that is approved by the membership. That way if they want to have the HOA fund more/bigger events, then they can approve the increase in dues. Likewise if they don't want to increase their dues, they can request that that line item be removed.

As for the size of the fund, you can still have an event or two with your small budget. You just have to scale back the size or only fund part of the event. The HOA might not be able to provide a bounce-house for the kids, but you could pay for the meat for a BBQ and let the rest of it be pot-luck. If the membership wants more, then they can get involved and find a way. Think of your Social Events fund as seed money towards membership involvement.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Dwight,

Not all assn's require the membership to vote to ratify the budget. I see nothing wrong with earmarking a certain amount of $$$ for social activities. If only a handful of members attend that's not the board's problem -- they are trying to promote unity w/i the membership. After awhile the board will get the message and stop the social events due to lack of participation; in the meantime I say more power to them for at least trying to get the community together.

I certainly do not agree with what Edie's community is doing. ALL the members of the assn must be informed of the social activities; not just those who have email addresses.

DwightT (Idaho)
Posts: 664

Posted:

I gotta remember to be careful with may/should/must with this group. Let me rephrase that a bit. IN MY OPINION it should be a line item in the budget and also IN MY OPINION the budget should be presented to the members. Even if the membership is not required to ratify the budget, IN MY OPINION they should at least have the opportunity to review it to see how the money is being spent and offer THEIR opinions about the amounts.

I also see nothing wrong with setting aside funds for social activities. As I previously mentioned, we allocate $2000/year for our events. But our homeowners also have the opportunity to provide input on the budget and to be a part of the Activities Committee that decides how that money gets spent.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By DwightT on 09/29/2008 11:01 AM
I gotta remember to be careful with may/should/must with this group. Let me rephrase that a bit. IN MY OPINION it should be a line item in the budget and also IN MY OPINION the budget should be presented to the members. Even if the membership is not required to ratify the budget, IN MY OPINION they should at least have the opportunity to review it to see how the money is being spent and offer THEIR opinions about the amounts.

I also see nothing wrong with setting aside funds for social activities. As I previously mentioned, we allocate $2000/year for our events. But our homeowners also have the opportunity to provide input on the budget and to be a part of the Activities Committee that decides how that money gets spent.

Dwight,

I surely agree with your opinion, and in the real world HOA budgets would be handled in the manner your opinion suggests. But, as we all know, HOAs do NOT fall into the category of "real world"! :-) My assn provides a copy of the budget with the annual meeting notice. I suppose a member could comment on it at the annual meeting; however, it's already been adopted by the board so the comments wouldn't hold any weight. And, although I do agree the members should have some input I don't know that they should be required to ratify the budget. We must remember that a budget is only a guideline -- the numbers are not carved in stone. Changes can be made throughout the year as economical factors change. If the membership is required to ratify the budget are they then required to approve an amendment to the budget?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Mary - you said:

If the total income for the year was $100,000 and the total expenses for the year was $90,000 there is a net profit of $10,000, or what Renae is referring to as "leftover funds"! Plain and simple. These "leftover funds" (which are added to the equity of the assn) either stay in the checkbook or are transferred into another account, such as a reserve account. And, yes, these monies could be used to fund a reserve account. Just deposit the money in a separate bank account and show it as a transfer to reserves (a debit to the Reserve Account in the income section of the balance sheet).

++++++++++++++++++++++=

There is NO way we could do this! At the end of the year, any surplus UNDESIGNATED monies has to go into the Reserve Fund (Note Capial Letters - 20 year planned out Reserve Fund).

There is no way we could set up another little reserve fund just because the planned budget line items were out of whack. About 6 and then again at 9 momths into the year we look at the Y-T-D vs. the Budget and MAY shuffle funds around, so the bottom line stays the same - but we could not set up another bank account. The residents would revolt!

MaryA1 (Arizona)
Posts: 7,043

Posted:

Susan,

I wasn't suggesting setting up another reserve fund. I had the impression this assn does not have a reserve fund. They can set one up and use the excess funds for the initial funding. Another thing to keep in mind, not all assn's are 501(c) as yours is. There are no laws telling these assn's what they must do with any excess funds at the end of the year. The monies can just be left in the checking account!

GloriaL (Georgia)
Posts: 195

Posted:

I've been following and posting in this thread. There seems to be both good and bad with HOA's funding in full or partially neighborhood parties.
My question, which no one seems to have answered, is:
Do you allow or encourage Non-Members to attend these Events?
How do you guys feel about the HOA funding parties which are open to those who do not reside in the HOA nor contribute dollars to the Event?

One reason an Event was denied any funding was that the hosting HomeOwner wanted to include family members and friends who are non-residents.

What do think about this aspect?

KirkW1 (Texas)
Posts: 1,665

Posted:

Quote:

...Do you allow or encourage Non-Members to attend these Events?

I absolutely would not encourage non-members. I wouldn't be into checking ID cards to see if the person lives there, but the party is for members.

Quote:
...How do you guys feel about the HOA funding parties which are open to those who do not reside in the HOA nor contribute dollars to the Event?

The only way I would be in support is if this were some larger activity. I could see the HOA participating in an event that involved several neighborhoods and the proportional share of funding came from those neighborhoods. (I have never seen this, but could go along with the idea of building the larger community.)

HOA activities are for the residents of the neighborhood. They should be aimed at building the neighborhood. For instance, we are sponsoring activities for National Night Out. This is because we believe neighbors getting to know each other is good for the neighborhood. As people know each other crime rates tend to go down, and pride in the neighborhood goes up. I also believe that it will help foster the relationships between board members and the residents.

DwightT (Idaho)
Posts: 664

Posted:

Like Kirk, we don't invite or encourage people from outside of the neighborhood, but neither are we going to go around and verify that only people from the neighborhood are present. Sure there have probably been some party crashers, but it's not worth getting into an argument with them over a couple of hamburgers or some candy for the kids.

RenaeW1 (Florida)
Posts: 42

Posted:

Quote:

Posted By MaryA1 on 09/29/2008 2:23 PM
Susan,

I wasn't suggesting setting up another reserve fund. I had the impression this assn does not have a reserve fund. They can set one up and use the excess funds for the initial funding. Another thing to keep in mind, not all assn's are 501(c) as yours is. There are no laws telling these assn's what they must do with any excess funds at the end of the year. The monies can just be left in the checking account!

Mary, you are correct. We DO NOT have a reserve fund. We are not 501(c). We fill out an 1120H. I wanted to start a reserve fund instead of funding HOA sponsored parties. Our neighborhood is around 12 years old with a pool and I feel things are going to start needing repairs soon, so I am pushing for a reserve fund.

We didn't have any money allocated for parties or a reserve fund, so some are wanted parties funded, I am wanting a reserve fund started. Maybe we can do both?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Renae,

There is no reason why the BOD cannot take any unused funds at the end of the year and deposit them into a savings account earmarked "Reserve Fund". I would do all in my power to convince them that it's crucial to have a reserve fund. You are treading on thin ice -- 12 yrs old with a pool and no reserve fund. What if the pool needed to be resurfaced? Would the members vote for a special assessment? The members need to be educated on the need for a reserve fund, too. Ask them if they would rather have a social event or a special assessment?

Now regarding the reserve fund. The board should also take steps to have a reserve study done. It may cost a few thousand but it's well worth the expense. The study will identify all reserve items, their life expectancy and the dollar amount needed to cover future repair, maint, replacement. The study will also tell the board how much should be deposited into the reserve fund each month. Since nothing has been put away for 12 years, the intial amount will most likely be quite high, but the board can make adjustments depending upon the budget. The key is to get started now and make regular contributions. It will probably take many years to catch up but it will be a start and may be the difference between requiring a special assessment or not. It looks like it's up to you Renae to educate the board and the members! Good luck!!!

JacqueL (Florida)
Posts: 3

Posted:

In our documents, it states that all members must be assessed EQUALLY, and that expenditures of all funds must be used to EQUALLY benefit ALL members.

Therefore, in the past, whenever a party has been suggested, we have MANY requests for refunds from members' dues (the amount that was proportionately used for funding said party) because the function was scheduled on a weekend they had to work, during their vacation, or because they simply chose not to attend. We have several hundred members, and it is never possible to EQUALLY benefit ALL members. We cannot use funds to benefit any subgroup like those who want a party (we have many elderly who would not be in attendance, many people who work all kinds of shifts on every day of the week, folks who are intolerant of certain foods and those against the noise, etc.)

To avoid this bookkeeping nightmare, we do NOT allow for funds from the HOA budget or reserves to be used for social gatherings. Instead, residents formed social groups (clubs) which are self-funding to fill the need of those subgroups of members to get together socially. Believe me, it is much better!

DianaB4 (Oregon)
Posts: 13

Posted:

My take: HOA money should never be used to pay for parties. If you have money to spend like that, unless it was specifically budgeted in your annual budget, you should put it toward your reserve. Our community gets volunteers to organize fun things....a summer party would mean potluck in every way.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By JacqueL on 03/18/2011 4:05 AM
In our documents, it states that all members must be assessed EQUALLY, and that expenditures of all funds must be used to EQUALLY benefit ALL members.

Therefore, in the past, whenever a party has been suggested, we have MANY requests for refunds from members' dues (the amount that was proportionately used for funding said party) because the function was scheduled on a weekend they had to work, during their vacation, or because they simply chose not to attend. We have several hundred members, and it is never possible to EQUALLY benefit ALL members. We cannot use funds to benefit any subgroup like those who want a party (we have many elderly who would not be in attendance, many people who work all kinds of shifts on every day of the week, folks who are intolerant of certain foods and those against the noise, etc.)

To avoid this bookkeeping nightmare, we do NOT allow for funds from the HOA budget or reserves to be used for social gatherings. Instead, residents formed social groups (clubs) which are self-funding to fill the need of those subgroups of members to get together socially. Believe me, it is much better!

@ Jacque - I'm not sure why any Association would give funds back for an amenity that isn't used. There should be no bookkeeping nightmare. If the Association has a pool, playground, etc., and members chose to not use it or the hours of it being open doesn't coincide with their work schedule which prevents them from using it, doesn't mean that it's not equally available for all members.

This would be the same as a social gathering. It's just a benefit that they can chose to use or not to use. The Association wouldn't be barring them from the function.

Having a modest social fund is of course the choice of each Association. However, I believe that it should only exist if the reserves are fully funded and the membership concurs.

Tim

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Renae:

As you stated earlier that you are a fairly new HOA turned over from the developer I wanted to try and clarify a couple of items for you:

1) Many posters have mentioned non-profit rules; however, this is not always the case. I noticed at this time it does not show what state you are from and in some states the HOA can be set up as i.e., Non-Profit Corporation, Limited Liability Company, Non-Stock Corporation, etc. and while there are similarities there are also slight differences. Therefore, check your documentation and insure how your HOA has been set up as these are the corporate or company state statutes that you would follow regarding the corporation/company issues for your HOA.

2) Reserve Fund: MaryA is right you need to take care of this as soon as possible with her excellent advice. Generally after turnover from the developer a reserve study should have been performed regarding all the common HOA areas for any future potential large expenditure to repair or replace any common area items. I would recommend having two accounts (1) a general operating account for the annual budgeted items and (2) a separate reserve account which is money set aside for future large repair/replacements. Having a proper reserve fund helps to potentially avoid having to levy a large assessment against property owners for large repairs if funded properly.

Also, depending on your state statutes you may be in violation by not having a reserve fund as some states require this fund to be in place. So my questions would be: (1) what state do you reside and (2) are you single family homes, condominium, etc.?

When it comes to funding parties you might refer to your state statutes as some will state something to the effect of assessments/dues are only to cover common area expenses or to maintain common areas, etc., and parties are not common area maintenance expenses. My personal opinion is parties can and should be covered by homeowners pitching in towards maybe a potluck and everyone bring a dish to share, plate and plastic silverware. Also, if alcohol is allowed I would recommend BYOB and the HOA absolutely not provide, due to various state liability issues. Unfortunately the time has ended when individuals used to be responsible for their own actions, now states are putting the liability also on those who provide the alcohol.

PamelaM5 (Florida)
Posts: 85

Posted:

We have two parties a year, outdoor events with members providing the entertainment, a boat race (no motors) or boat decorating contest, and food, wine and beer. We charge every attendee $1.00, allow them to bring any houseguests who might be there at the time and have a 50/50 to help defray expenses. Our HOA budget has an entertainment line item which has always been sufficient to pick up the rest, which doesn't amount to much most of the time.

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