Are We Following the Rules?
Surplus Budget Funds:
QUESTION. We just ended the year with a surplus which we wish to transfer to the current year. Can this occur by board action or do we need an owner vote?
ANSWER: Since HOAs are nonprofit, any excess income at the end of an association's fiscal year (a budget surplus), must be applied to next year's budget or refunded to the membership. Revenue Rulings 70-604and 75-371. Although boards approve next year's budget and the carryover of surplus funds, revenue rulings require a membership vote on the carryover so as to avoid taxation issues. Most associations vote on an excess income resolution at their annual meeting. The resolution may be included on the ballot along with the election of directors or done by voice vote at the meeting and recorded in the minutes of the meeting. For a more detailed explanation, see Gary Porter's article on this issue.
Reprinted from Davis-Stirling.com byAdams Kessler PLC
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Are we violating all the rules?? Of course based on prior years there won't be an excess....just an excessive assessment! AND, if refunded is it taxable to the resident as Riverside Mgmt.stated?
Publishing Election ResultsAs provided for in Civil Code §1363.03(g), the tabulated results of an election must be:
•promptly reported to the board of directors,
•recorded in the minutes of the next meeting of the board,
•made available for review by the membership, and
•publicize results to members within 15 days of the election.
The tabulated results must include the number voting for each issue or candidate, the number voting against, and the number abstaining from voting. Civil Code §1363.03(g).
Following is a sample report of election results announced to the membership at the meeting, posted on bulletin boards, and published in the minutes:
ELECTION RESULTS
There were 5 candidates for 3 open seats.
Number of units: 110
Not eligible to vote* 10
Quorum needed ** 50
Ballots cast 61
Abstentions*** 4
Voided ballots**** 1
1. John Rebel 40 elected
2. Mary Goode 38 elected
3. Fred Friendly 32 elected
4. Sally Snippy 14 not elected
5. Larry Loudd 42 not elected (withdrew from race)
Write-in:
-Bart Simpson 1 not eligible
Also from Davis-Stirling
Just skimming the links provided, I'd hope that by putting any (otherwise) excess funds into reserves, that we would no longer have excess funds, and so avoid tax consequences. This presumes that we actually know how much to transfer to reserves in a timely manner.
On a related issue, I do wonder if the agenda was adequate in two regards. First, was it delivered early enough, and second, was it incomplete. Does an item described in its entirety as " Revenue Ruling" let resident's know that they are to vote on disposition of any surplus?
Good points Jim. It has always been my belief that our Agendas are much too vague, which works against the membership. I believe that adequate information should be given so that residents are able to attend and converse about the item. "Revenue Ruling" is too vague and Agenda posting not timely.
As to the "Revenue Ruling" we had 10 seconds notice since there was not an attachment with the agenda explaining, which lead to a lot of confusion. Mgmts. statement that funds would be taxable to the resident if they were refunded was also a big issue. Was placing it in Reserves an error.......Guess we need Gary Porter's expertise.
JMO...Another important article that Gary Porter, CPA wrote and should be followed by our BOD's.. ..you certainly can't tell by just reviewing the Balance Sheet. Actually I can type you one up today starting with the last one and moving forward a month and would be willing to bet that none of you would know the difference if that's all you have.
Of course, I'm not suggesting that is happening, just giving you "food for thought".
http://www.garyportercpa.com/index.php?option=com_content&view=article&id=73:advising-directors-how-to-perform-their-association-financial-responsibilities&catid=4:management-articles&Itemid=23
An example of items not flagged from last years Balance Sheets or at least not brought to our attention were: Payroll tax expense.....over budgeted by $ 10,000. If anything they would have been underbudgeted by any pay increases during the year and the payroll tax expense would have been minor. Obviously someone placed a decimal point in the wrong place or used the wrong % in doing the budget. The other item was Landscape Repairs & Maint. .....under budgeted $ 21,000. Mgmt. Fees were also $ 6,000 under budgeted...why, don't we have a contract? I don't recall anyone at the Board Meetings inquiring or even mentioning this until Jim Gore did his review and posted on the web site. That's all water under the bridge now, but a lesson to be learned for this year. That is exactly why the above is important to be followed and for us to also question any major differences in the Budget...after all it is our money.
Thank you!
Does it make anyone else nervous that we will be totally responsible for the legal requirements and day to day operation of the Association in the near future?
While we look forward to running our own Association, the tools we need are not in place. Heck, we don't even have job descriptions for the board members!
Seems there is a lot of work to be done on P&P in a short amount of time. Kent and Sebastian will have their hands full. BIG Thanks to them for taking the job in preparation for the transition from Pulte to Homeowners.
Another area I spoke about: "Infighting" among the board members which we ran into when shopping for our home and talking to the residents living there. For example: something on a neighbors front porch that caused a glare into their house across the street...taking out some trees that were too big for the yards (probably happen here)....neighbors friends parking in front of their houses....those people have been staying there for months, etc. Will be interesting for sure and not likely to be any different than all the other HOA's. There will be Growing Pains that's for sure.
Since we are just starting our terms as board members and there is no training per se. I am reading the newly posted bylaws and governing documents as posted on our new and improved glenbrookeca website. I have many questions and encourage you to communicate your concerns about any inconsistencies and areas that you want to question. In reading the papers there is now requirement to post the tabulated results only the winners. The results can be challenged and then the tally should be revealed. I will get up to par reading and understanding the monthly financial reports also. I am encouraged that we will now have a monthly posting of finances. Hopefully the fear of increased assessments is unfounded and at first glance does not appear to be the case.
I would like to hear from newly elected Board Member Kent Sherwood on some of these issues. Kent?
Here are my concerns:
Are there job descriptions for Lodge Staff? If so, where are they and have our Board members reviewed them?
Have there ever been any performance appraisals conducted of Lodge staff? If so, who does them and at what interval are they conducted?
What are Lodge staff hours?
Why is the Lodge front desk left unattended so frequently?
Can we justify three full-time Lodge employees?
Why don't we have Board meetings at least every other month instead of quarterly?
As we prepare for transition to resident-run community (can't come soon enough!), we need to look long and hard at stuff like the above. Really hard!
Guess we need to get our comments and questions in order for the community meeting on September 28th , 7 p.m. - 8:30 p.m.
Norma, what community meeting is this? Maybe I've missed something! Please fill me in, thanks!
I also missed it at the last BOD's meeting....the confusing one. Darcie was telling me about it, seems it was announced by the communications committee Remembered something about it afterwards, just too much noise and couldn't hear everything each speaker said. Guess we need to check it out with one of the committee members so info can be posted accurately. It's not on the calendar.
This is scheduled to be posted on GlenbrookeNews the week before the meeting, but since there are questions about it now, here is the information I have. This is not a Board Town Hall meeting but an "Informational meeting: from the Communication committee. The first one is on a trial basis.
On September 28, 2010, The Glenbrooke Communications Committee will hold an “Information Exchange” from 7:00 PM until 8:30 PM. The Communications Committee consists of Harold Wheeler, Bill Elliott, Linda O'Hara, Jim Morris and newly elected Resident Board member, Kent Sherwood.
You may be most familiar with the work of the Communication Committee in organizing volunteers to deliver the monthly Gazette (unless you opted out of the delivery).
According to Harold Wheeler, there is a planned agenda for this meeting to include:
1. Delivery of the monthly Gazette report.
2. A proposed alert system for the Glenbrooke Community. This system will provide e-mail and telephone alerts of significant HOA Board or community issues to those who choose to participate in the system.
3. Proposed changes in Lodge operation hours report.
There will be a question and answer session after each of the three presentations. In addition, there will be a period for open discussion at the end of the exchange. If you have any questions regarding the Glenbrooke Information Exchange, please contact Harold Wheeler, Chair, GCC.
OK...just made a call to clarify this meeting. It's being held the 28th, 7 - 8:30 p.m. by the Communications Committee to explain Gazette, Alert system, etc. and then the last 15 -20 minutes will be for any other questions residents may have. If they pertain to something concerning the Board they will pass that information on to them. It would be up to the board members to follow through if they choose. Word "on the street" is that the new board members may be arranging a Town Hall meeting at some point. Nothing definite that I know of.