HOA Operating Account

You say you haven't looked at your financial report in a few years, so before you start accusing people of poor fiduciary duty, try looking at a few reports for, say the past three to five years, along with the board meeting minutes. The reports should show trends in what expenses have gone up faster than others. Hopefully, the minutes will show discussions about those expenses and efforts to keep them under control. If you have questions about what you see, to to a board meeting or two and ask your questions. You may not get everything answered in one shot, so write down your questions in the order of what's most important to you.

As for equity, could you be looking at the balance sheet instead of the income/expense statement? Owners equity is what's left after all business liabilities are paid off. In other words, if the community were to end and all the remaining bills paid, whatever's lef is considered owners equity. If this is in the income/expense statement, that should be met income or loss. It could be a typo, so ask about that as well.

When I was on the board, we'd look at the year end her income and depending on the amount, we might transfer a portion to our reserves (the account that's supposed to be used to pay for major common area repairs and replacements like roof repair). You could ask if the board is planning to do something similar.

By the way it sounds like you have a healthy resresves, so what's your probkem? You do know there's something called inflation, don't you? 2020 dollars may not buy the same amount in 2025, when it may be time to do a major repair, so you may be very happy you have a reserve fund that won't be completely emptied for a 2025 project and you have other work coming up in 2026 and 2027.

Chuck

You say they re carrying the $100K as Equity when is should be called Reserves. $100K might be overkill for some associations or it might be way short of what is needed for an other association. Money in the Reserves is for future repair, rebuilding, long term maintenance, etc. The amount necessary should come as a result of a Reserve Study. It should not be guessed at. Also Reserves should not be spent on other things, such as pay a lawyer so the $50 dues increase might well be warranted.

What size and type association are you? What are your present dues?

We are 51 single family residential units, within a group of 4 other HOA’s. There is a master HOA that determines our Reserves as we share the roads, guard gate, lawn maintenance and so forth. We have no other capital assets as we all own them together in different proportions. There has been a reserve study completed which I have reviewed which has led me here. Our yearly contribution to the master HOA Reserve is @4,500/yr with a total exposure of @ $57k. Our yearly budget has $15k/yr for reserves.. I asked a BOD member why and they said just in case of a disaster or emergency. We have over $231k in the reserve account besides the $100k of equity. I guess we are liquid but jeez I thought this was a non profit.. our yearly budget is $96k. Aren’t there limits for any of these accounts? I’m sure our elderly members would rather have their cash than the HOA...

i have reviewed the HOA Reserve Study as we are getting ready to repair our roads...

When you say they rather have their money than the HOA... Realize that a "HOA" is NOT a "they or them" it is "YOU and your NEIGHBORS". So the money you pay in dues is contributing to the maintenance, upkeep, and expenses of EVERY neighbor/member. Your basically paying for the "group rate" than individual costs. In the long run actually saving you and your neighbors money.

I know that my non-HOA home I pay for more expenses than ever did in the HOA. My HOA the dues covered lawncare, clubhouse, pool access, and garbage/recycle. I pay nearly 2 times that much as an individual. Plus with a lot less benefit with no pool or clubhouse access.

I think it would helpful for Chuck to post some summary of what the categories are in their RS, and when the study was done, and whether the study provided, as most do, a spreadsheet showing the recomputed assessments profile to bring the Reserve Fund to the appropriate level, when this will occur and what the balance is supposed to be this year, next year, etc.

In other words, data is needed.

Chuck

When you say your HOA is part of a Master HOA, is the $4,500 you give the Master enough for them to pave you section's roads or is each section responsible for paving their own roads? Road paving costs are the #1 expense of many HOA's.

Chuck

I am still confused on what the Equity Funds are for? Are they not Reserves?

Out total budget is $94K and we are facing roof replacements (paid by the HOA) of $400K commencing in 2027 and stretching out over 7 years. Thus we are aiming for a Reserve of 5 times our budget, but that is just us. In 2034 our Reserves will be about $50K and will begin to rise.

There is no relationship between yearly dues and what is needed for a properly financed Reserve Fund.

You may be right you do need more information to get a clearer picture of the finances, so if you haven't already done so, ask for a copy of the most recent reserve study and take a look.

That said, words like "too much" mean everything and nothing, depending on who's asking and why, so I'd focus less on what's subjective and concentrate on checking the financials regularly to ensure the budget is based on YOUR community's needs and the board is managing them in a transparent and prudent manner. Don't worry about what other communities do or don't do - you don't live there, so how would that affect your community? I say this because people often look at other communities and wonder why X's assessments are so much lower than Y community - too many variables can explain the difference, starting with asking if community X even has a reserve fund.

If a day comes where you have no idea whatsoever on what's happening with the finances and the board can't or won't respond to your questions, that's when you need to start worrying. Until then, it would appear you have a disagreement about what the balance should be. Sometimes, you have to agree to disagree and move on.

I think maybe we got off my original concerns but have appreciated how much everyone has helped me and given guidance!!!! This is a great source of information and would recommend to everyone...