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HOA
RESERVE FUNDS – OR PETTY CASH FUND FOR BOARD MEMBERS?
By
Jan Bergemann
Published
November 22, 2013
Every
year towards the end of the fiscal year we hear about a lot of
discussions about creating next year’s budget. But in most
cases it’s more about funding the reserve funds than about the
actual budget.
While
condo owners can file complaints with the Division about
mismanagement of finances – and especially about
misappropriation of reserve funds, homeowners living in
communities regulated by FS 720 have nowhere to go if their
board members spend their money for other purposes than
intended.
Even
if FS
720.303(6) contains similar provisions than its
counterpart in the Condo Act [FS 718.112(2)(e)+(f)], the total
lack of enforcement of the HOA statutes allows board members to
use the existing reserve funds as their petty cash funds. I have
seen financial reports and budgets fully funding the reserve
funds, but at the end of the year there was only a big ZERO in
the reserve account.
Board
members and their CAMs and attorneys know full well that owners
can’t take any legal action – the only way to enforce the
provisions in FS 720, since legal action would drain the coffers
of the association even more.
In
reality reserve funds were created in order to avoid huge
special assessments if something – like pool, roofs or roads
– has to be repaired or even replaced. If the reserve funds
are wasted on new palm trees or surveillance cameras lots of
money is needed if suddenly big road repairs become necessary.
And that’s when the special assessment letters hit the
mailboxes of the homeowners – many of them have to scramble to
find the funds needed to pay for these special assessments
payable with very short deadlines. And there will always be a
few who will be unable to pay the special assessment and will
face liens and foreclosure. But that’s obviously just
considered collateral damage – caused by board members
unwilling to follow the laws.
Another
example for the old saying: THE BEST LAWS ARE USELESS WITHOUT
ENFORCEMENT!
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