Reserve Fund Accounting

I have recently taken over as the Treasurer of our small (12 units) HOA and am attempting to bring the financials into Quick Books.
I have been able to successfully bring over all of the bank accounts, customers (HOA members), vendors, etc. however after doing a full analysis (via excel) of our reserve study and where we should be at I am coming up with a 25K shortfall of where our reserve study says we should be on the assumption that all of our cash assets at year end technically belong to the reserve account.
I want to be able to provide financials that show that we are actually in debt to our reserve account yet still keep our cash accounts consolidated.
I am aware that reserve funds should be kept in a separate account and am willing to "pay" to the reserve account all of the remaining funds at the end of the month to the reserve account, just not sure how I can show the part where we are in debt to our reserve and that the reserve is short.
I have a bookkeeping background but have never worked with HOA accounting and therefore not sure how to record this ugliness so as to provide a clear picture to the home owners that although we have money in the bank none of it is really available for non-replacement projects and that we really need to be frugal right now.
Any direction would be much appreciated.

Just as long as you don't include that amount as an expense when completing your Form 1120-H for the IRS each year. The IRS does not consider money placed in a reserve account as an expense. It becomes an expense only when you take it out of the reserve account and spend it.

Lance

I do not see it as an accounting issue.

If you have done a reserve study and the study says you should be contributing say $50K per year. If you are contributing less, then the account is short. The issue is what do we do about the "shortage", versus how do we account for it.

Now the questions are has there been a Reserve Study and have you all agreed to fund it?

Hope this helps.

Lance

You understand the problem. Explain it and show it in numbers (simple ones) to the BOD.

If they take a head in the sand approach, then get one of them to agree with you. Make a motion and get a 2nd (you and who agrees with you). That way it will require a vote and make it to the Minutes even of it fails. Some will start asking questions and you can talk it up.

Roger

I think what Lance was saying is the association is putting everything in one big pot then assigning what is "left over" to a Reserve Fund and the Reserve Fund is falling short of what they had agreed to fund based on an earlier Reserve Fund Study. (I love run on sentences).

Like income is $100K. $80K to Operating Expenses. $20K to Reserve Fund.

Well this year we had $100K income and we needed $90K for Operating Expenses. We put $10K in the Reserve Fund, thus which is it:

1. The budget is balanced and shows $10K to the good.

2. We are $10K short in the budget because we robbed Peter (Reserve Fund) to pay Paul (Operating Expenses).

I say #1 is short term thinking and #2 is forward thinking.

Kind of like pay me now or pay me later.....LOL

I agree. By the sound of it they need an assessment increase to properly fund everything.

Do you count it as income for the year that it was collected?

Many Thanks for all the great advice.

Lance,
There's been some good advice. I think to prove your point a simple table should work (or a line chart may be better).

I assume your reserve fund study concluded with some amount of $$ needing to be deposited into the reserve fund every year.

Supposing it concluded that you needed to put $1000 per year into the fund, starting with 0 in 2004 (you really need to update the study, too) you would show:
2004: 0
2005: 1000
2006: 2000
.
.
.
2013: 9000

Then show where you're actually at. Should be an open & shut case.

But most importantly, as others have said, MAKE THE ACCOUNTS SEPARATE!

I would first find out if they have stolen money. Mine has had a lot of it disappear. In Fl.we need a law that the state attorney's office can come in and see all the books back from the beginning. My board had 2 sets of books as when I was sec. they would say one thing at the meetings and then give me different numbers to record. That is the first thing I would do.
Also mine illegally broke our never to touch reserve fund for roads only, into 3 funds and much disappeared. When I moved her April of 03 we had $117,000 in reserve, not we have less than $98,00. According to what the by laws say, we should have over $500,000 by now. No major road work has ever been done. These people have been lining their pockets.

Adelle

Are you accusing someone of stealing the money?

Lance- If I am understanding your original post, what you are most seeking is how to show the issue to the HOA Members.

A lot of the answer to this depends on how your group prepares their minutes of Board meetings. My VA based HOA records the meetings then the Secretary prepares a transcript which is voted into approval at the next meeting and that will be our Minutes record of the meeting. As the Treasurer I provide a monthly financial report. From time to time I provide status updates on the Reserve Fund. What I say shows up in the Minutes under the Finances category. So simple. If your HOA uses a similar minutes format, why not just do that? Alternatively, prepare a clear concise written report in the format, what was intended, where we are, what is correct and does not need fixing, what needs fixing, Treasurer's recommendations. Read it at the HOA Board Meeting and request a copy of the written statement be attached to the Minutes. If anyone ever wants to look it up, there is is in the Minutes.