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Subject: Capital Reserve usage
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PatriciaS23
(South Carolina)

Posts:1


05/31/2019 7:35 AM  
My HOA has purchased pool furniture and used Capital Reserve Funds amounting to $10,000. It is a very small community of 38 residences. My contention is that these are not fixed assets and should not come out of the Capital Reserve. Second part of this inquiry is that our roads need to be repaved and since we are a gated community, we own the roads. Because of the frivolous use of funds for the pool furniture (chairs, umbrellas, etc.) we will be required to be assets. What can be done? What is the statutory regulations for fund usage in SC, who can be made responsible in this fiduciary transaction.
SheliaH
(Indiana)

Posts:2518


05/31/2019 9:30 AM  
If you want to know what the state law says, start with this link and see for yourself if reserves are mentioned - https://www.scstatehouse.gov/code/t27c030.php.

If you haven't already, you should also take a look at your documents, which may list rules on how the reserves should be used. Usually, the board decides when and how reserves are used, but they should be guided by the recommendations in the reserve study.

Most documents state that a special assessment is necessary, homeowners have to approve that expense, but this doesn't sound like that on its face. Was this is a special assessment? If so and most of the homeowners voted for it, you'll have to pay your fair share. You might also consider running for a seat on the board if you're concerned that reserves aren't being used properly - make that an issue to run on, present your argument to your neighbors and let them decide accordingly.

Pool furniture may seem frivolous to you, when you factor in ALL the residents and possibly one or two guests per household, the amount of wear and tear can add up fast. Remember this is a community pool, so the equipment needs to be a lot more durable than the stuff you might get from a home improvement store, where the equipment is intended for use by one household. And when was the last time the equipment was replaced - if it was, say 10 years ago, you can't expect 2009 prices to hold up in 2019.

All of that said, it would appear the $10K would have been better spent on the roads (which may cost a lot more), so have you taken any of these questions to your board? If so, what was the response? If not, why not?

RichardP13
(California)

Posts:3596


05/31/2019 10:40 AM  
If one would look, pool furniture would be a asset and be included in anyone's reserve study. If can be replaced or repaired using reserve funds. There is nothing in the OP's opening remarks that state they don't have the money to repave the roads.

The replacement or first time purchase of pool furniture doesn't sit well with one individual.

Have you raised this issue with your Board?

Been there, Done that
DouglasK1
(Florida)

Posts:1406


05/31/2019 11:08 AM  
Posted By RichardP13 on 05/31/2019 10:40 AM
If one would look, pool furniture would be a asset and be included in anyone's reserve study. If can be replaced or repaired using reserve funds. There is nothing in the OP's opening remarks that state they don't have the money to repave the roads.



I'm assuming this is a mistype: "required to be assets" and was supposed to be "required to be an assessment", which does suggests the OP thinks they will no longer have the money to repair the roads after this expenditure.

Escaped former treasurer and director of a self managed association.
RichardP13
(California)

Posts:3596


05/31/2019 12:08 PM  
Then I think they have much better problems than the pool furniture.

Been there, Done that
MarkM19
(Texas)

Posts:332


05/31/2019 2:02 PM  
Patricia,
As others have mentioned Pool chairs and Shade should and would be in your reserve account typically homeowners have access to it if they request it. On all of the boards I have been on it is done every year before Pool season kicks off. We would replace 10% of the chairs that needed it the worst. Replacing all at once may mean that they were not doing the proper maintenance in prior years. It is a pay me now or pay me later deal. Yes the chairs should be a higher quality as mentioned and are not cheap. They are however necessary for people using this amenity.

If you have private roads you certainly have that listed as a large reserve line item and the remaining life left before repairs. In my last community we had a plan and every 3 years we would do a resurface of our streets. Not knowing anything about how many feet of street you are maintaining it could be 10 to 20K or more. This is all part of HOA life.

JohnC46
(South Carolina)

Posts:8347


05/31/2019 5:33 PM  
Pat if using $10K of the Reserves for pool furniture (which is a valid expense) is preventing you for paving the roads, your association has larger problems then the $10K expenditure.
KellyM3
(North Carolina)

Posts:1375


06/01/2019 6:31 AM  
Posted By JohnC46 on 05/31/2019 5:33 PM
Pat if using $10K of the Reserves for pool furniture (which is a valid expense) is preventing you for paving the roads, your association has larger problems then the $10K expenditure.




This is true. Roads before everything but we don't know how large this community HOA budget and reserves are. Maybe they bought pool furniture to coincide w/ the opening of pool season? Subjective posts about frivolous expenditure and the ole "HOA is embezzling and mishandling funds" postings are hard to gauge.
SamE2
(New Jersey)

Posts:103


06/02/2019 8:15 AM  
The pool furniture is a fixed asset. The Board had the right to buy it with capital funds unless your documents limit their spending. Nothing can be done at this point.
PatJ1
(North Carolina)

Posts:64


06/02/2019 8:41 AM  
Can those referring to pool furniture as a fixed asset, please share your source. Pool furniture is an asset but not fixed as it has a much shorter useful life than a fixed asset. Pool furniture wasn't even mentioned in our reserve study and I don't see where it should have been.

Board members are volunteers. Many have no idea what they're doing. Educate them. Don't beat them up.
NpS
(Pennsylvania)

Posts:3364


06/02/2019 8:58 AM  
Posted By PatJ1 on 06/02/2019 8:41 AM
Can those referring to pool furniture as a fixed asset, please share your source. Pool furniture is an asset but not fixed as it has a much shorter useful life than a fixed asset. Pool furniture wasn't even mentioned in our reserve study and I don't see where it should have been.





See https://www.accountingtools.com/articles/2017/5/10/fixed-asset

To generalize - A fixed asset is something with a useful life of more than 1 year and intended for actual use rather than for sale or inventory.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
RichardP13
(California)

Posts:3596


06/02/2019 10:41 AM  
IF the pool furniture wasn't in your reserve study, then it can be added as a "capital improvement", but it might need to pass certain dollar tests. For instance, in California, any capital improvement over 5% of the annual budgeted expenses, must be approved by the membership via a secret ballot.

A general rule if a asset needs to maintained on a monthly or regular basis, funds come from operating account. If over a year it can come from reserve accounts.

Been there, Done that
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