Reserves

I don't see why you don't just gather the bids and costs of the job you want done and put it in that month's budget. Putting the item up for vote/consideration should get the ball rolling. Reserves may be a dedicated line item set at an agreed upon amount each month instead of putting in whatever is extra. This should free up the budget a bit for some of those little "extras" that need to be done. Your HOA is a non profit and thus should be funded to meet it's spending requirements for the year. If your colecting too much it may be time to look at the amount your collecting. It may also be time to use the extra to pursue bad accounts too.

Hugh,

On the recommendation of our auditor, we maintain an operating contingency of between 10 and 20% of annual assessments. This is separate from the replacement reserves. It is shown on the balance sheet as "unappropriated members equity". It is used to cover any unexpected expenses, such as a larger than normal snowfall's removal costs.

Our reserves are funded by monthly transfers of the budgeted amount from the operating account. I do not think it is proper to automatically transfer any operating surplus to the reserves. Any such transfer should be explicitly authorized by the board. This should only be considered if the reserves are not funded up to the level recommended in the reserve study.

My understanding is that you can't automatically move funds from the operational account into reserves,at least in Ohio. Your budget is suppose to include monthly contibutions to the reserve account in an amount necessary to meet all future capital expenses, but not less than 10% of your budget.

A lot would depend on the amount left over but any substancial amount should be returned to the owners. You need to be careful that you are not unfairly charging current owners more than their share of future expenses. Special assesments are also an unfair burden on owners because they are due to poor panning and inadequate budgets in the past.

This whole budget process is why lenders are now looking at the financial stability of the homeowner associations (COA & HOA)as well as the individual when approving mortgages and why these mortgages are being considered higher risk investments. Anything that might add extra finiancial burden on owners is considered a finiancial burden on the lender, like poor planning, overcharging and special assesments.