Reserve fund accounting

Started by WildD • 6 replies • 1377 views

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WildD (Georgia)
Posts: 13

Posted:

Our HOA is now financially in a position where we can start putting money away into a reserve account. We have not yet has a reserve study done(cost), but have haphazardly come up with our own. My question is how do you account for the various items in the operating budget as well as in the reserve account.

In the operating budget, does each expense get a line item, and we make monthly transfers? Or do we make one big transfer at the end of the year.

Next, in the reserve fund, are these individual future expenditures counted as a liability and then the reserve transfers build up the it in the reserve fund until it's funded?

Does this make any sense. We are not getting much help from our Mngt company on this.
We are a 100 home community with a clubhouse, tennis court, and pool with an annual operating budget of about $60,000

Thx

KerryL1 (California)
Posts: 14,550

Posted:

For starters, WildD, I'd be very concerned that your MC doesn't give you much help. There are reserves specialists and I think you want to hire one beau you have some very pricey "components." In other words your reserves study would be pretty large. Along with every part of the amenities that you have, e.g., re roofs, furniture, pumps & motors for your pol, its surface, etc., you might also have sprinklers, fencing or walls, and street lights and streets and sidewalks.

How old is your HOA? It's typical, maybe even required in some or many states, that the developer set up reserves schedules for their HOAs.

WildD (Georgia)
Posts: 13

Posted:

Ok, we really do not get much help from the MC. They seem to be overworked. The developer did not set up a reserve schedule for us.

The HOA is about 15 yrs old. We will look into a reserve study but for now have good idea of what is going to need replacing, how long and how much it will cost.

KerryL1 (California)
Posts: 14,550

Posted:

Thanks.

Given that your operating budget only is $60k/ann. I'm thinking that your MC isn't onsite and doesn't work for you many hours a week. Is that right? How much is your landscaping/ann?

Well, I guess most HOAs could do their own studies. At 15 years, I think you've already repaired some components, yesHow did you learn how much you need to save to reroof the clubhouse? To replace all of the pool components? To re-surface the tennis court. Did you get proposals? Or rely on manufacture's manuals for some?

In CA, reserves accounts and operating budgets must be separate. But I don't know about GA or about your other questions either. You'll get answers for others though!

TimB4 (Tennessee)
Posts: 21,062

Posted:

WildD,

Welcome to the forum.

As you have found out, a Reserve Study specifies the amount of money that is needed to be set aside for future expected repairs, maintenance and replacement. To learn more about Reserve Studies see the following thread on this forum (note: some of the earlier links in that thread are broken but have been fixed by a later posting):

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx

For budgeting purposes, the annual amount going to the Reserves should be counted as an expense to the Association.

For financial axxounting, our Association pays everything from the operating funds and, when the expense is for a reserve item, transfer the funds from the Reserves into the Operating fund.

I'd be happy to provide you a copy of the spreadsheet we use if desired.
E-mail me: [email protected]

WildD (Georgia)
Posts: 13

Posted:

Tim, I sent you an email, would love to take a look,at your spreadsheet to see how your HOA accounts for these things.

As far as how we know what the useful life of am entities and how much replacement costs are, we've brought in professionals/contractors and gotten estimates.

Someone asked, our annual landscaping is $9,000 and our MC is not onsite, they just pay the bills and handle correspondence from th homeowners.

TimB4 (Tennessee)
Posts: 21,062

Posted:

WildD,

I've replied to your e-mail.

Tim

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