Help with Fund Balance and Journal Entry

Hi - I need some help - Does the attached example make sense?

My main questions are:

1) Why are the reserve funds recorded as long-term liabilities on our balance sheet?
2) Why is the Reserve Transfer shown on the Income Statement as an expense? I'm not following this.
3) Fund Balance never is equal to the logical thought of Reserve Savings less the Reserve Liabilities to give a fund balance.

Anyone have any insight?

1) Why are the reserve funds recorded as long-term liabilities on our balance sheet?

Look at it this way, if you paid a water bill, it is recorded as an expense, but, you'll never see the money again. With a transfer of funds to a reserve account, it is treated as an expense or payment. But, the money is still with the association, just in bank #2. The long term liability is how the funds are disbursed amongst the reserve components.

2) Why is the Reserve Transfer shown on the Income Statement as an expense? I'm not following this.

It is a payment, thus an expense

3) Fund Balance never is equal to the logical thought of Reserve Savings less the Reserve Liabilities to give a fund balance.

You Balance Sheet is off, the reserve savings account should match the liabilities account

Let us assume the pool heater is $10K and has a 10 year life expectancy. If there is a Reserve line Item for it and it is being funded at $1K per year is this carried as 100% funded?