The Missing $57K from the Reserves

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  • missing - not present or included when expected or supposed to be[1]
  • no votes by the Board approving any loans
  • no general ledger entries of any "loans"
  • redacted budgeting information provided to homeowners and board members from the treasurers Marian Derr and Eugene Makar from 2005-2011 showing no deficit of the operating fund nor any "loans".
  • auditors warning letter in 2011 that states the missing funds, presumed to be "loans" must be repaid by the homeowners

Beginning in 2003, an Interfund Receivable of the Reserve Fund is shown in our 2003 Annual Report balance sheet of $1,823. In 2004, $2,345 was transferred from the Reserve Fund to the Operating Fund increasing the Reserve Fund Interfund Receivable to $4,168. This practice has continued through 2009 whereby the balance now stands at $56,823 as shown in the draft 2009 Annual Report (see attachment "2009 draft Balance Sheet.pdf"). Note that in this Balance Sheet under Assets, the $56,823 is shown as a receivable due to the Reserve Fund. Under liabilities, the $56,823 is a debt owed by the Operating fund. While the net effect to the Balance sheet is zero, these two entries indicate that the Reserve Fund assets have been loaned to the Operating Fund in the amount of $56,823.

While our Bylaws allow loans from the Reserve Fund to temporarily cover Operating Expenses, there are conditions on these loans. From Article XX, paragraph 3c:

Loans from the reserve funds to the operating fund may be made from time-to-time, as authorized by vote of a majority of the Board, but such loans must be repaid to the reserve fund in full within six (6) months, or by the end of the next fiscal year of the Association after the fiscal year in which the loan is taken, whichever shall be the first to occur.

There is no mention of any Board approvals of these Interfund loans made since 2003 and no provisions for repaying the accumulated debt was made until the association received an audit warning letter in 2011.

  1. Oxford Dictionaries Online, American English, missing