Dennis, your reply in this matter is most helpful. Can you recommend a method of review – direct access, PDF scans, paper printouts-that is most likely to result in approval of the request to review specific transactions such as tax-exempt reimbursements to Board members for meals and entertainment? The management company here stated they only provide paper copies, and that the paper copies cannot be certified as true and complete duplicates of the original. They are requiring 30 cents per page of non-certified paper. I don’t like the idea of printed paper circulating and favor seeing files electronically through a secure portal. Would this method be reasonable to request?

Beautiful, Dennis. We knew we were interpreting 33-1804 correctly but our President is pretty slippery and we needed the assurances you have just provided!

Thank you, Dennis
To clarify, we are not technically a gated community. We have one gate to reduce through traffic but the other end of that street is not gated. And while the majority of the courthomes are clustered in one geographical location, there are some smattered elsewhere.
Official notice of the meeting was sent out at 12:02 a.m. on the day of the meeting. When questioned, our President claimed ample notice had been provided at the previous Workshops and that the reminder notice sent out was “more of a courtesy” so that members didn’t have to search back through emails to find the Zoom information. He also falsely claimed the meeting information was on the community calendar accessible via the Management Company’s website. So much seems improper by my eye test.
As far as added expense, there will be! And it will all fall on the Courthome owners who never asked for a sub-association.

DPK,
it is difficult to answer without knowing the specifics of your CC&R’s but generally the association is entitled to charge assessments for whatever it needs to operate the association and for a year and to raise the money for reserves to fund long term maintenance and upgrades of common property. But the operating account must be maintained separate and distinct from the reserve accounts. While the association may borrow money from the reserves to cover short falls in the operating budget it must repay the reserves the following year. Intermingling of funds is a violation or IRS rules, and bad financial management and will result in depleting the reserve funds with expenses not intended for those reserve. The association has no right to charge assessment in excess of it’s own established predicted needs. If its expected cost considering inflation is $40,000 and they have collected $100,000 they have no right to do that. While there are many applications for reserves that is why an overall reserve account is so important it is not limited to one expenditure but to fund all the expected longterm needs of the community. While accounting for inflation is appropriate this is a mathematical analysis and not guesswork, especially in such a short term consideration. Let the association know that their practice of co-mingling funds is inappropriate and if they do not change this you will be forced to report the association to the IRS and they will be audited fined and could lose their non-profit corporation status.
Dennis

Rhonda,

If the board noticed the workshops 48 hours prior and allowed any member to attend and speak at those workshops but especially prior to the vote by the board than the workshops were conducted as meeting of the board and in compliance with the open meeting laws. As for the action of the board to create a Sub association they have to be very careful. While your CC&R’s allow the concept, I doubt that they describe what and how they can do that. Creating new assessments or restrictions or new administration could all be considered to require amendments to the CC&RS approved by the members to do so. While I’m not sure why they believe that a sub association is valuable and in the best interest of the community, but they have to walk a very fine line to stay in compliance with the CC&R’s.
If I recall correctly your community consist of a gated portion and a separate community of court homes outside of the gated community. This would make some sense but if it adds cost to either group it could be challenged.

Dennis

Thank you for your prompt reply.

DPK

The board hires all contractors for the association, but it is most probably done by the community manager as authorized by the board. The community has no right to challenge the accountant or to question the accountant only the board does. What you can do is challenge the board on any question or concern that you may have, and ask that they find out from the accountant to answers to your questions.

Dennis

Well they did threaten and it came to going around and getting people to sign a petition of members against it and the HOA meetings were at full capcity, it was unethical to say the least, didn’t even try to approach our reserve issues from a position of working together it made me very disturbed and still does. But now they are trying to keep financial information that used to be in our financial reports from us now an that makes me very nervous as we are at the same point again with our reserve account due to their managment. This is how they think members won’t question their management and remove them.

I think you have served on the board where you live and are kind of on the defensive which is not what I expected but I understand why it seems I have to explain my position while you explain the boards. Thank you for some points you made I knew but see I will have no choice but to continuously request documents if they don’t change the transparency. If they don’t provide the documents, I will file a complaint with the state and go from there. I already told them this issue is not just going to go away because they hem and haw around hoping I will become discouraged.

DPK,

You have a lot in this question. Technically the operating account is used to fund the anticipated financial needs of the association and to contribute to the necessary reserves for long term maintenance and capital expenditures. The long-term reserves can be retained in one fund or in several specific funds. If you have a street fund then you would need either one or more funds to deal with the long-term maintenance and upgrade of any other common property in the community. No reserve funds can ever be used to fund annual operating expenses. and no reserve funds can ever be used to fund any other long-term maintenance other than what the fund is designated too. You cannot use road funds to pay for repairs to other common areas.
If you have a onetime short fall in operating funds, then the board can authorize a supplemental assessment to cover the shortfall. If you end the year with a surplus in the operating account, it must either be returned to the members or used to offset assessments in the following year. All of this is in IRS regulation for these communities.

Financial records should be retained permanently as should all community documents and board meeting minutes.

The association is authorized to raise whatever money they need to run the association for a year no more and no less.

Relative to reserve funding that issue is very complicated but can best be explained in a very simple concept. You need to know what and when long term maintenance will be needed and then make sure that your raised enough money so that maintenance can be done when planned. You want to factor in inflation and interest earned on any money raised in prior years. Just in time funding is all you really need. Professional reserve study companies will draw a lot of grafts and pictures and convoluted reports and talk in terms of % funded all of which is totally meaningless and a total waste of time and money.

The association has a fiduciary responsibility to the community to preserve and protect the financial assets of the association and to have the discipline not to spend money on stuff that it was not intended to pay for. When an association board has no discipline in its spending habits is breeching its duty to the association and can be held personally liable for those actions. Liability indemnification does not extend to breach of duty by board members.

Dennis

I do understand our CC&R’s I wouldn’t questions their actions if i didn’t, but didn’t think it appropriate to disseminate online. CC&r’s are really pretty standard documents developers use to incorporate an HOA when they sell off the community. As far as the specially assessment that was done in nafarious way too, threatened to not fund our bulk cable contract to use the money for Reserve which was nothing more than holding it hostage to get us to agree to the special assessment, but they didn’t state a sunset date which I beleive is 1 year and has to be voted on again, but they call it perpetrul now and say they will threaten our cable again if necessary! I don’t beleive they get several bids for things either, they just find who they want could be a friend or involve kickbacks, but I know I was on the ACC committee and witnessed how they operate. These politician type board members go rouge and derail the HOA.