Raiding Reserve Funds

Ellen - Are you saying this happened in your HOA? What do you mean by a "slush fund?" In Merriam Webster a slush fund is defined, among other ways, as "an unregulated fund often used for illicit purposes." How is your reserve being used illicitly? In my HOA we have had many discussions about the proper amount that should be held in reserve -- and not come to a conclusion. In California it is unclear whether there is a specific amount that must be held in reserve. We have used some of what we did have in reserve for a project or which we had an assessment. Do you consider this a 'slush fund?" -Tom

Slush fund: "an unregulated fund often used for illicit purposes."

So in these trying times what source should the Board use to pay your bills when the CCs don't do it?

And how is paying the operational costs of the property "illicit"?

And what afect do you think raising the CCs or having an assessment on the unit owners will have? I would suggit might push more owners over the edge.

What would your Board do if they were unable to cover your costs and the membership ( out of ignorance) voted NOT to approve the use of reserve funds?

Thomas,

No my HOA has not done this but I have seen several postings here where it has either been done or the association is considering doing this. By slush fund I mean the reserve fund being used for anything other than what it is intended for.

Dwight,

I said nothing about a legal remedy. Lots of board members do not know much about the association documents (tho they should) and it is up to their management company to give them good advice. If an HOA is running out of money it calls for a special assessment with members being informed on why it is necessary. A special assessment meeting should then be held and voted on by all members. Sadly, the only answer is that members in good standing must take up the slack from owners who aren't paying. A special assessment to be used for day to day operations will probably be less than having to vote for a special assessment to cover large repairs, etc (for which the reserve fund was set up). Hopefully, the economy will improve.

As Louis says (paraphrasing) to Victor in "Casablanca":

"Shall I say Rainy Day Fund? It's a much more pleasant term."

That's what our RF amounts to. Our docs allow the BOD to do virtually anything with the funds.

Though we're very protective of those funds and would increase dues or levy a special assessment before dipping in.

But that's just us.

Sorry, I have to jump in here. Ellen DID NOT say that the P.M's license should be revoked. Her first post said--"Management companies that allow this should have their license revoked. " That ain't even "semi legal" as you put it. How quickly we refocus on a single word or phrase that was used in error.

Dwight you are right in your statement " I feel that a member would probably get better results if they were to just remind the Board (who is responsible for giving the PM direction) of the need to get approval from the membership."
That is the law in Florida. We are talking about P.Ms moving Reserves WITHOUT getting the vote from the membership. I just wanted to help Ellen out a bit.

Awww Jon,

You're never done. But you are right!!! How's that for a compliment?

Dwight,

In addition you evidently did not read a post that complained that their PM was using reserve funds for items that were not covered and told the owner it was the management company's right to do so.

Thank you Donna......

Just gets to me how people throw blame around hitting everyone except those responsible.

PMs and I will throw in attorneys, are like kids and dogs. When I see an out of control dog or misbehaving kid I don't blame them I blame the parents or owners.

The kids, dogs, PMs and attorneys will do whatever you let them get away with.

The Board members must do their job and the first step in that direction is they must KNOW their job. Always easier to hire someone to pass the buck off to and than complain when things don't work right.

If you don't plan to do the job than don't take it!

In the world today with all the difficulties it is more important now then ever before for Board members to do their jobs not visit once per month and kid themselves they are playing a constructive role.

You should have been reviewing the financials all along not just once in a while when you think there might be a problem.

But people willing to work, make an effort and take responsibility are tough to come by while people who are willing to stand by and watch are a dime a dozen.

No matter what your role or position, owner, Board member, or Board officer it is your property and investment and either worth your effort or not.