Do you have a separate Reserve account?

Started by MarilynN1 • 6 replies • 1566 views

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MarilynN1 (Michigan)
Posts: 30

Posted:

Does your HOA have a separate account with the required percentage of the annual budget as written in the By-Laws or do you count the combined separate checking and separate savings as part of the Reserve also? Our By-laws do not specially say anything about a separate account but say we must have 10% as a Reserve. One of our Co-Owners insist we must have the 10% in a separate account in addition to the other 2 accounts. It's not in our By-laws written that way.
In other words and to keep it simple.......do you have a separate account for Reserve only?? Thank you so much.....I value your imput! I am in Michigan.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Our bylaws and CCRs say nothing about reserves, but our local county law requires them and specifies that they be in a separate account, so we do. We actually put them in a separate account, with different board members having access than our operating account.

You don't mention having a reserve study done, but I would suggest that setting aside a specific percentage of your revenue for reserves is not a very effective method to make sure you have money when you need it. A reserve study will identify all items that you will expect to pay for from reserves, anticipated lifespans, estimated repair/replacement costs, and a funding plan for how much you should contribute each year.

Escaped former treasurer and director of a self managed association.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Sorry, meant to say we keep reserves in a different bank altogether.

Escaped former treasurer and director of a self managed association.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Marilyn

If our Covenants/Bylaws called for 10% of of our annual dues to be placed in a "Reserve Account" then I would insist we have such an account and it not be co-mingled as it opens the door for playing around/creative accounting like operating expenses being counted as part of the 10% to Reserves.

Having the Reserve Account spread among several type accounts such as a higher yield CD long term account at an Internet Bank and a lower yield CD no term account at a local bank would be acceptable but together, they are the "Reserve Account".

TimB4 (Tennessee)
Posts: 21,061

Posted:

Our savings account is the Reserve Account.

The amount we deposit into reserves is based on a Reserve study (and this is the only semi-accurate way to determine how much is required to be deposited into the reserves).

Basing reserve deposits on a percentage of the annual assessment (or a percentage of the operating budget) is doing your Association a disservice. It puts money aside, but you don't know if it's enough money or not until a reserve study is done.

JimR24 (Texas)
Posts: 399

Posted:

Yes Marilyn, we do separate our reserve accnt from our operating account. Our reserve accnt is invested in FDIC insured CD's and it is controlled by the Association - kept separate from our operation account from which checks are produced by our property management company.

We had a reserve study conducted a few years back and we are try to comply with its recommendations. According to our reserve study, we are about 42% funded in our reserve accnt; in place of the preferred 100%.

Great question!

Quote:

Posted By MarilynN1 on 06/02/2015 4:09 PM
Does your HOA have a separate account with the required percentage of the annual budget as written in the By-Laws or do you count the combined separate checking and separate savings as part of the Reserve also? Our By-laws do not specially say anything about a separate account but say we must have 10% as a Reserve. One of our Co-Owners insist we must have the 10% in a separate account in addition to the other 2 accounts. It's not in our By-laws written that way.
In other words and to keep it simple.......do you have a separate account for Reserve only?? Thank you so much.....I value your imput! I am in Michigan.

Lovin' life with my honey!
and, President of HOA in Texas

KerryL1 (California)
Posts: 14,550

Posted:

Ore CC&Rs say, Marilyn, that we must have separate operating and reserves (savings) account. We have three separate budget areas (The Base, the Commercial Owners, the Tower Owners [floors 3-25]) so we have three reserves accounts and three operating accounts.

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