WHY?? Much of this bylaw language is very old (from 1978) and predates the institution of CIF funds. These proposed bylaw changes abide by PA Law and work with Association codes, and policies and procedures. It provides transparency with reporting of capital expense overages and directs what happens with unexpended sums from capital projects. It modernizes communication methods and adds Finance Committee responsibility throughout the budget process. It includes borrowing responsibilities and provides clarity on CIF fund use. It addresses those costs (such as engineering, architectural, etc.) that are needed to bring a project forth to the membership, and provides options for overages on CIF projects.

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Rationale: The omitted portion of “No expenditures for the purpose of a capital project…” was moved out of the ‘Budgets section’ and modified in “6.8 B.1”. Since the 1990’s PA Law and Act 180 made sweeping changes allowing Associations to collect Capital improvement fees to be used for capital projects. Because of this we added a new Use of Funds section in 6.8.B.1.

 

We included capital expenses to our “Line items over budget” requirements for transparency. Rather than ignoring capital expense overages or unitarily prohibiting the ability to fund these unexpected costs, the proposed bylaw allows these overages to be funded and requires that these expenses are reported to the Board.

 

When capital projects come in under budget, what happens to the savings? Today, the Association pays for capital projects out of the General fund, the Replacement reserve fund, the Water operating fund, Water Capital reserve, and the Capital Improvement fund. By directing that savings stays in the fund of origin, we are improving controls and safeguarding fund balances.

 

Today, we don’t need to print and mail everything. We live in a paperless world and can communicate using email, e-blasts, and we have a website for viewing our important documents. The result is operating cost savings.

 

The current budget approval process is ongoing in October, November, and December and the current bylaw does not effectively capture the Finance Committee role and a more accurate timeline for the board approval/adoption process.

 

Daily cash management responsibilities lie with management and this bylaw dictates that management may move internal funds for efficiency but they must be disclosed to the board.

 

A section, “Use of Funds” (proposed “B”), was added to this bylaw proposition to include funds needed for the preparation phase prior to bringing a proposed capital project to the membership. The budgetary overages that the Association realized during the Mailroom Expansion Project highlighted the Association’s need to modify its approach to Capital Improvement Fee (CIF) projects.

 

Using the current bylaws, costs needed to bring CIF projects (engineering, architectural, permitting, code compliance, etc.) are not considered. However, this old approach creates a major gap in the total project cost as these costs have grown to be substantial within the past 50 years. These critical elements cannot be fully explored without spending money in the planning stages.

 

Without learning from history, we are likely to repeat it; therefore, this proposed bylaw change would allow projects to be thoroughly explored in detail before bringing the project to the members for a vote, by giving the Association the ability to budget for these pre-construction costs. This bylaw also gives the board the ability to reimburse these costs from the CIF should the project be approved by membership vote. And it states that the board may pay for these costs directly out of the CIF fund, which would further save on member dues. This language conforms to PA law and was reviewed and approved by our attorney and auditor. The proposed bylaw necessitates that these costs can only be for “fees for architectural, engineering, and professional fees needed to bring a capital project to membership vote.” Any other uses are not permitted, which allows the security of a detailed CIF project proposal and categorical parameters that must be met.

 

While the changes in proposed section [B]1, outline the use of CIF funds for the planning stage of CIF projects, section [B]2 dictate show CIF funds may be used on an approved project that has exceeded its budget. The addition of this section allows the Board to approve additional funding up to ten percent (10%) of the CIF project amount approved by the membership. We hope that projects never go over budget, but in the event that this happens, allowing board approval for a 10% overage is reasonable. The bylaw also addresses paying for CIF overages from other funds. This may make sense if certain components are being reserved for in the replacement reserve fund. In this event, the board must establish terms for repayment of borrowing.

 

There are no changes to the debt ceiling bylaw