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Subject: Fiscal Year
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BobB31
(Florida)

Posts:121


04/18/2019 4:59 PM  
Our bylaws (small 48 unit self-managed HOA, single family townhouses) says this in Article I, section 4:
"The fiscal year of the Association shall be the calendar year."
Yeah! Great! But then, Article VI's amendment begins:
" ... the Association shall adopt a fiscal year commencing Sept 1, subject to change by the BOD as events warrant it."
The amendment left Article I.4 in its original form.

I consider this a contradiction. Am I wrong, or am I missing something? I am on a committee to update our bylaws to conform with FS 720, and this is one of the things I had flagged as needing a change.
SueW6
(Michigan)

Posts:530


04/19/2019 4:18 AM  
Well of course get this contradiction corrected.

This happens when people don't look at the entire document when doing amendments.
TimB4
(Virginia)

Posts:16414


04/19/2019 4:57 AM  
I'm not a CPA.

As I understand it, if you change your fiscal year, you require IRS approval.
You might want to verify this was done.

see:

How to Determine Your Company's Fiscal Year

Criteria Needed for the IRS to Approve a Fiscal Year Change in a C Corporation

About Form 1128, Application to Adopt, Change or Retain a Tax Year

NpS
(Pennsylvania)

Posts:3583


04/19/2019 3:16 PM  
Minor error in drafting is not likely to create problems. The amendment, if signed by authorized parties, would supersede original document because the amendment had a later date.

On the other hand, there are some practical considerations.

Example - We changed our fiscal year end from 12/31 to 3/31 around a decade ago because we didn't want our snow season costs split across 2 fiscal years.

1. Short year. In the year we made the change, there was an extra year-end to deal with. First, we had our ordinary 12/31/10 financial statements prepared. Then, there was another set of financial statements for the 3-month period from 12/31/10 to 3/31/11 that needed to be prepared. For obvious reasons, that one was called the short year. Then, the next set of annual statements were prepared on the following 3/31/12. You should check to verify that your HOA properly accounted for the short year. In your case, the short year would have been from 12/31/X0 to 8/31/X1.

2. Other affected clauses. When we made our fiscal year change, the drafters missed the fact that our docs called for publishing budgets by 11/1. That makes sense when the fiscal year ends on 12/31 but not when it ends on 3/31. Our solution was to apply the rule of 60 days prior to the new year. So we now publish by 2/1, 60 days before the new fiscal year begins. The 11/1 publication requirement is still in our docs. If we ever get around to making changes, a revision will be made.

3. Cost. Until recently in PA, the law allowed deed recording offices to charge a premium of $10 per unit for HOA recordings. Our drafting errors were never corrected because of the cost. Now that the $10 per unit rule was overturned, we'll clean up those portions of our docs that are inconsistent.

4. Vote. There's a difference between a change and a clarification. A fiscal year change might require approval by the membership depending on what your docs say. But a clarification can often be accomplished with just the approval of the Board. Cleaning up the inconsistency in your docs would typically be recognized as a clarification.

Sikubali jukumu. Read all posts at your own risk.
GenoS
(Florida)

Posts:3132


04/19/2019 7:56 PM  
Posted By BobB31 on 04/18/2019 4:59 PM
Our bylaws (small 48 unit self-managed HOA, single family townhouses) says this in Article I, section 4:
"The fiscal year of the Association shall be the calendar year."
Yeah! Great! But then, Article VI's amendment begins:
" ... the Association shall adopt a fiscal year commencing Sept 1, subject to change by the BOD as events warrant it."
The amendment left Article I.4 in its original form.

I consider this a contradiction. Am I wrong, or am I missing something? I am on a committee to update our bylaws to conform with FS 720, and this is one of the things I had flagged as needing a change.

Yeah that should be changed via an amendment. You could do an end-run around it by amending the Articles of Incorporation which would take precedence over the Bylaws. But if you're amending the Bylaws might as well just correct it there.

That reminds me of my own Bylaws which were amended to delete Section x.y in its entirety. This section had to do with the original developer who's been out of the picture for 25 years. Unforunately, 3 other sections refer to Section x.y and those were never amended, so we have phantom dangling sections in our Bylaws.

Make them consistent and you'll be happy. Also add the ability for the HOA to impose late charges. Not in the bylaws = you can't do it in Florida. Go over FS 720 with a fine-toothed comb because there are other "gotchas" in there that require specific things in the Bylaws in order for your HOA to take advantage of them. Like the authorization to use anonymous mail-in balloting. There are others.
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