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MINUTES | OHCC LIVING | DECEMBER 2018 | 9 There are new requirements imposed on Homeowners' Associations by Assembly Bill 2912, signed by the governor just two months ago and effective Jan. 1 • It mandates new standards for Fidelity bonds. • It requires the Board to document its monthly review of the financial statements. • It restricts transfers of funds in excess of $10,000 without written Board action. Our current bond is adequate under the new law, covering the full value of our reserve assets and three months of operating income, about $8 million. However, our insurance may have to be modified to meet new cyber crime requirements. Our insurance broker is currently working on this modification, and it will be in place before year-end. The Board currently reviews the financial statements monthly. However, the new law requires an exhaustive and detailed process. To tie up the entire Board with a line by line review of our 195-page financials would cripple our ability to do the other important work of the Association. Similarly, the procedures we have in place regarding the transfer of funds are adequate, but would not meet the onerous new requirements. For example, we have dozens of certificates of deposit which mature and are reinvested at various times. It would be nearly impossible to convene the Board every time one matures and is reinvested. To address these requirements, and as permitted by the new statutory language, the Board is creating a Financial Executive Committee with specific limited powers. We have looked at the pattern of investment of reserve and operating fund balances and determined that our assets are under performing. We will limit ourselves to financial instruments that are fully insured by the federal government, but will vary the term and size of the investments to take full advantage of the current market. With more than $6 million dollars in investments, a half-percent improvement in annual performance would provide an additional $30,000 to reduce our annual assessment. Corrections made in September have resulted in an October monthly statement that is much more representative of our financial performance. However, it has been determined that errors were made when entering the budget numbers into the system, and this has resulted in over- and under-budget reports that are misleading. In December, the Board will consider a series of minor adjustments to the current budget to correct these errors, and to take into account other factors that have occurred since the budget was created 10 months ago. This will result in financial statements for the nine months ending Dec. 31 that are more straightforward and useful for management, and less confusing to Members. There will be no overall budget increase. Last month, we requested two volunteers to assist the Board by serving on the Budget and Finance Advisory Committee. Several people stepped forward, and on the Board's agenda today is the appointment of two of them. We have already started the process of preparing the Budget for 2019-2020, and will begin meeting the week after Thanksgiving, with a deadline of presentation of a completed Budget recommendation at the February Board Meeting. Operating Cash and Receivables $1.37 (millions) Reserves and Other 4.85 Total Assets $6.22 Liabilities $ .816 Equity $ .596 Year-to-Date October (millions) Income $655,000 $4.57 Expenses 597,000 4.35 Net $ 58,000 .22 Income increase due to interest earnings +$ 25,000 Reduced spending various -$ 195,000 Net surplus $ 220,000 Treasurer's Report By Greg Kusiak to conduct an on-site visit with photos of components for the 2019-2020 Reserve Study in an amount NTE $7,850. Funding: Operations – Administration. Approved, no objections. M. Formation of Executive Finance Committee Approve the formation of an Executive Finance Committee that shall be delegated the authority necessary to take such actions as may be required to ensure compliance with the provisions of the California Civil Code sections 5380, 5500, 5501, 5502, 5806. Approve the appointment of the President, Vice President and Treasurer of the Master Board to the committee. Approved, no objections. N. Update Rules and Regulations Approve the Rules and Regulations as written and to send them out to all homeowners for a 30-day review and comment period. Approved, no objections. ADJOURNMENT With no further business to be discussed, President Murphy adjourned the meeting at 4:07 pm. NEXT REGULAR MASTER BOARD MEETING DATE: The Master Board Meeting in December will be held on Dec. 20, 2018 at 1 pm. OHCC HOA BOARD OF DIRECTORS REGULAR MEETING HIGHLIGHTS NOT OFFICIAL BOARD MINUTES continued from page 8

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