Finance & Legal minutes: 2013-05-14

Minutes:

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> F&L meeting 4/22/13 - special session
> Becky, Mary, Debbi
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> This meeting was a brainstorming session about the various alternatives to handing out rebates if we have money left at the end of the year. During the Skill&Thrills meeting in the Fall, our Accountant Len strongly advised us against giving rebates. The reasoning is as follows: we would have already paid taxes on that money, and then we are giving it back. Not a good practice.
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> F&L in previous meetings came up with a few possible options. Tonight we are walking through them to do a pro/con list of each. This is a step towards up bringing a proposal before the community.
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> Options that have been talked about so far
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> 100% of leftover money (money from now on) gets rebated. This is what we are currently doing
> 100% of money gets moved to reserve fund
> Split between reserve and rollover funds
> Split between reserve and special projects. Note, special projects could be moving money into already existing committee rollover accounts or setting up a new rollover. More will be explained below.
> 100% special projects
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> Doing brainstorming of pros/cons for each
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> 1. Rebate everything - what we've been doing so far
> Pro - people may get money back (tho not for certain)
> Pro - historical precedence.
> Pro - you get money back which could be used if we have a special assessment
> Con - bookkeeping hassle - wait till books finalized, usually at least 6 months past end of year until determined
> Con - our CPA recommends we don't give these because we would be paying taxes in 2012 for money that we give back in 2013!!!!
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> Nobody on F&L supports continuing current way.
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> 2. 100% Goes to Reserve Fund
> Pro - reduces tax liability
> Pro - offsets our low interest rates we are earning in reserve
> Pro- offsets some of the variations between estimates and actual costs of items in the reserve
> Pro - Much simpler for bookkeeper
> Pro- may reduce our possible reserve payment increases when we do new reserve study every 5 years.
> Cons - The community is facing a possible special assessment for road repair. Would be nice to have some funds to offset that
> Cons - paying it forward, people who move out don't benefit
> Cons - don't have money available for special assessments(unexpected big projects)
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> Some F&L members support #2, but willing to support below options as well
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> 3. Split between reserve and committee rollovers (50% reserve and 50% gets divided into each committees rollover fund)
> Pros - still builds up reserve and has most of the benefits of #2 above
> Pros - gives committees a chance to save for bigger ticket improvements/projects
> Pros - gives a cushion for committees if they either under budget one year, or have a new expense crop up during the year
> Cons - Worried about giving committees too much control over large amounts of money -----we had very lengthy discussion on how we could improve that - stipulations on if over $500 must come before community. Much of the discussion was how to make sure there was good community input before a committee just spent the money. When a committee is made up of members that are working well, and communicating well, there is less concern. But sometimes committees don't function/communicate well and that is where the concern lies.
> Cons - the process for how to spend out of the rollovers needs to be simple as possible
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> F&L members pretty split between #3 and #4 below
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> 4. Split 50% Reserve and 50% into (to be created) Special Projects Rollover
> Pros - still builds up the reserve so has the same benefits as #2, just at a slower rate
> Pros - gives the community a way to build up money for special projects (like the shade structure) that don't fit easily into the operating budget
> Pros - The approval to spend out of the the special projects rollover would be at the community level
> Cons - The approval to spend out of the the special projects rollover would be at the community level
> Cons - would ultimately mean a slower process to spend the money, and committees would basically be competing against each other for those funds.
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> F&L members pretty split between #3 and #4
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> We were all aware that if we propose either of the last two, there would also have to be clear guidelines as to how it all happens. None of us recommend #1. #2 is the simplest from a bookkeeping standpoint, but it does not help the community save for those larger items that don't fit into the operating or the Reserve yet. #3 and 4 are very similar. The only major difference is who gets to make the decisions on the spending - committees or the community.
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> F&L will have more discussion at the next meeting, and then present at a community meeting. We might have a proposal, and we might have an information gathering process.
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