Retained Earnings

Can Retained Earnings accumulated over several years be used to reduce assessments?

Hmmmm ... if you are retaining funds every year, it may mean your assessments are too high, or, your reserve contributions are too low, or you maintenance is too little.

I'd start with reserve needs, contribution to those needs, and work my way into the maintenance/ops budget - then assess what it all means. Numbers are usually easy to understand once you have them in one place - in front of you.

No, if you want the bucket of retained earnings, divided by the number of owners, to reduce the assessment? That sounds pretty backwards - and, it means you are using money contributed by past owners to enrich current owners - kinda real bad.

Recommend - spend the retained earnings on maintenance/ops, or move them into reserves.

We had retained earnings of between 10 and 25 thousand dollars every year for a number of years. Inevitably, though, the budget wouldn't include certain items that really should have been included. We have reserves, but not for the pool. One year the pool developed a crack that required a big 6 week repair job to install "staples" or some such to repair it. The cost was $16,000 and that was not anywhere in the budget.

"Luckily" there was about $25k in retained earnings sitting there from the prior year and that was used to pay for the pool crack repair. In those years every month the board would discuss the need for an unanticipated expenditure that was not in the budget (none so expensive as the $16k pool repair) and "thank goodness" we've got what we need in retained earnings, eh?

I was never comfortable with how they went about things like that for a number of years. While never stated out loud, it was definitely the "policy" of the board to rely on retained earnings to make up for inadequate budget planning. Oh, and we still don't have a reserve for the pool.

The last couple of years the board (with different people on it than before) has decided at the end of the fiscal year, and in conjunction with the HOA's accountant, to roll the retained earnings over into the reserves.