Pay Expenses Using Reserve Funds

I live in Florida where the President of our HOA has given the OK for the property manager to use reserve funds to pay for on-going operating expenses.
When I ask the PM about this, he says we have a lot of money in Reserve ($86000 tot in 4 accts). We already used $13000 from reserve funds this year, and in order not to increase assessments, contributions to Reserves have dropped from $12000 in 2005 to a budgetted $1100 for 2008.

Would that constitute a lack of fiduciary responsibility on the part of the PM and HOA president ?

AlexC

I agree that reserve funds should not be used for operating expenses. Reserve funds are for use to replace infrastructure items, other items like pool equipment, etc. You should have a reserve study that details what the replacement costs are of all reserved items, the useful life of those items and what the contribution to the reserve should be. I have never heard of an Association that is over 100% reserved to where they could decrease the contribution.

Without knowing how you are reserved it is hard to make a judgement.

Rick
HOA President.

Donna, your response is right on the button - I just need to convince both our PM and our HOA president how arrogant they are.

Thanks

A president has no more authority than any other single board member, and cannot make such decisions on that authority. She can, and probably should be personally sued for her decisions as you describe them. The Board needs to meet in open session and decide this issue, and frankly it is both imprudent and unwise to use these funds as you describe them. I am sure the association could recover these funds from her personal resources if this was done successfully.

Please demand she dcoument the "authority" in your documents - it won't be there!

A fiduciary responsibility requires decisions to be both reasonable and prudent. I can't imagine how she can establish this clear abuse of her authority as meeting that responsibility.

The only additional powers a president has compared to any other board member is the obligation to run the meetings.

Board members refusing to curb her abuse are equally liable under law.

Raymond, please understand the president did not use Reserves to fund her personal expenses. It's just that assessments barely keep up with expenses so she tells the PM to 'transfer' funds in order to pay association expenses when needed.

Gerald, our FL statutes are clear on this subject - but the PM has already told me to stop quoting statutes. I know I'm a thorn on his side - I just wish he would retire soon. Regarding the president, I'm taking steps to remove her from the board...as we speak.

Thanks for your responses - this is a great discussion board.
Alex

Alex,
For the P.M. to tell you to quit quoting the Statutes is really an offense to you and is a clear indication of his ignorance of his duty to your association and BOD. Your President is also ignorant to the Statutes and is handling this out of her authority. The entire Board is the only governing body allowed to release funds for payment of expenses and they certainlt cannot spend Reserves on repairs and maintenances.

You do have Reserve statements that you posted so where does it say that you can take money from those funds for other items? I did not see where it is allowed. You need to do some researh and document the wordings from you Reserve statement and get the entire Board to listen to you. If you get nowhere with them, them the entire membership need to get involved.

Alex,
If I accept all that you say the Board is doing and the important fact that you stated you have some support for changing your board, my advice would be: Formalize your group and don't go undercover trying to get changes made. Present in writing to the board from your group what your concerns are and ask for a written response within five days upon receipt. If they don't respond, resend the same letter by certified mail and return receipt. If they do not answer, request an open meeting with your board to discuss the matters. Do all that you can to establish a paper trail. Do not copy your PM, they work for board and your problem is with the Board and one of the Boards problem is the PM. This don't work, marshal your troops are set up a town meeting (OPEN) and develop at that time a spokesman for your group, a mission statement and a treasuer and secretary. This is all above board and legal and it the Board and PM have a grain of sense they will come to the table. Keep complete and accurate records, be organized without being confrontational. And if that don't move them, sue them for one specific item, such as the President spending money on her own, but make sure you can prove it. Who countersigns the checks and bank transfers. Sometime during all this define specifically the state laws that are being ignored or broken and let them know you are not just blustering. Do not do that, be cool.

Robert, that's great advice and I do have homeowner support to follow through so I will do just that. It's ironic, but the HOA requested a new PM some 3 years ago because of his arrogance but his replacement was transferred last year so we got the 'bad' guy again. I don't know why the HOA did not object.

Alex