Use of Reserve Funds

I'm trying to understand the rules about using reserve funds. We would like to repair/replace granite/gravel that is decomposing and freshen up some of the plantings/landscaping in the community. Our last reserve study called for granite to be replaced a couple years ago, but it appears as though there was enough cash in the general account to cover the expense so the reserve wasn't touched when we updated the granite in the first half of the community. I'm trying to understand:

1 - Are we only allowed to use the reserve for things specifically designated in the report? BTW, we are 160% funded according to our study.

2 - If "no" on the previous question, can we use the previously allocated funds from the study now since it appears we didn't touch the reserves when we did the first half of the community?

Of course you can use reserve funds for things in the reserve study - now for something scheduled earlier, but not done, is certainly OK. Same intent, just timing. You can also add and subtract capital projects - adjusting the planning.

If you kept your Reserve Study and annual analysis up to date, and are truly spending at a lower rate, you should consider decreasing your annual assessment to bring your reserve fund down. Continuing to accumulate unneeded funds is poor management.

In CA, reserve funds may only be used to repair & replace the components (items) listed in the reserve study. SC must be different. AZ may have statutes on this topic.

HOAs can borrow from the reserve fund in CA, but must have a schedule to pay these funds back to send to owners.

Landscaping is sometime a reserve components and sometimes not. HOAs with a lot of trees, for instance, may have a long term tree replacement schedule in their reserve study. "Freshening up" landscaping normally would be in your operating budget.

with George, decrease the monthly contribution to reserves and and tack it on instead to you operations budget.

Shaun,

Rules, if any, would vary by State.

Typically, Reserve funds are used for the expected maintenance, repair and replacement of capital components identified by the Board.

Reserves should not be used for expenses that occur every year (that would be the operational funds).
However, if you are like us, we do set aside money in the reserves to cover the unexpected (such as an unusual amount of snow removal) but it's not something that happens every year.

To learn more about reserves, see the following thread in this forum:

Subject: Reserve Studies/Funds 101
Note: some earlier links in that thread are broken but are repaired (new links) later in that thread.

Bottom line is:

If there are not enough in the reserves to cover the cost of repairs/maintenance, the Board has the following options:

Defer the maintenance/repair to a later time
Do part of the job now and the other part later as funds become available (if this is possible).
Defer maintenance/repair of other components to fund this repair
Use what operational funds are available (with the potential of deferring some annual maintenance)
Special Assessments
Obtain a loan (however, if there isn't enough money put aside now, banks may charge a higher interest rate or not approve the loan at all)

Hope this helps,

Tim