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SOLERA DIAMOND VALLEY | FEBRUARY 2023 5 By Ralph Grider, Board Treasurer A term that has been kicked around for the past few years. What is it and where does it come from? At the end of every fiscal year, ours being July 1 to June 30, any income that has not been expensed is rolled over into Prior Year Equity with homeowners approval. The decision of what to do with the excess income is addressed in an Excess Income Resolution at our Annual Meeting. This is voted on by the residents of the community. Because we are a nonprofit entity, any excess income at the end of the fiscal year must be returned to the residents or applied to the following year's balance sheet, otherwise it will be taxed. Our community has always decided to apply it to next year's budget. Our annual budget for 2022-2023 is $1,624,476. The recommendation of Community Association Institute is to maintain in Prior Year Equity at a 10-20% level of your current budget. Our Prior Year Equity is $126,500, as of November 2022, which is 7.79% of our current budget. The auditors feel that this gives the association excess funds to cover a major unanticipated event not covered by insurance or reserves, such as failure in our plumbing lines or earthquake damage. For our community, we should have $162,447 in our Prior Year Equity account. You can find this account in our balance sheet G/L 4998. Prior year equity is a component in calculating our cash on hand and has a goal of 45 days. In regards to Reserves; having a Reserve Study and choosing a specific plan for reserves is very critical in having healthy associations financials. It's very favorable on HOAs that have established a Reserve Study such as ours. The money for the reserves must be held in a separate account from the operating bank accounts of the association. Each year the Board must decide how the reserves will be funded and what percentage of your dues are applied to the reserves. Reserve money cannot be used for operating expenses unless there is a special circumstance. In our case, we had to borrow from the reserves to pay our attorneys to proceed with the litigation process against Pulte. These funds were promptly paid back to the reserves once we received the funds from Pulte. I hope this article clarifies some of the confusion surrounding Prior Year Equity. As I have stated in the past, this community is well funded regarding reserves, but our operating expenses continue to increase. Staffing, utilities, minimum wage, etc. Prior Year Equity — Explanation? Message of Hope By Paul Bradstreet, Board Member When I began writing this article, we had just celebrated New Year's Day. Most of us reading this article have celebrated a great number of new years and hopefully we'll celebrate many more. Just before I wrote this article, there occurred a tragic event at the Buffalo Bills vs Cincinnati Bengals football game. Shortly after making a tackle, Damar Hamlin collapsed on the field from cardiac arrest. Medical personnel rushed to his aid, performed CPR, and he was quickly taken to the hospital. Teammates from both teams immediately went to their knees to pray for Damar. Their hope was that he would recover from his injuries and they knew exactly what to do. It was inspiring to see dozens of young athletes on their knees praying for their brother. As I write this letter today, the news reports that Damar is now breathing on his own and sent a video call to his teammates. He told them that "Love you boys!" and made his signature heart-shaped gesture during the call. My hope is that all of us can be inspired by this story of faith, hope and courage as we move into and through the New Year.

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