Assigned cash in the reserve fund

Started by JohnH38 • 7 replies • 296 views

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JohnH38 (South Carolina)
Posts: 100

Posted:

Sir:

An certain portion of our assessment is placed in the association Reserve Fund, theoretically based on the requirements as determined by a professional Reserve Study for capital items replacement.

Unassigned cash covers the annual budget set for maintenance and operations.

Our board considers the assigned cash as a whole big pot of money and spends it according to its whims.

For instance, we will have to grind and asphalt our roads 30 years hence ($500K): Shouldn't cash each year be assigned for that purpose and kept for that purpose only?

Our board spent $150K to install unnecessary French drains and took the money out of the Reserve Fund, although it was not a "capital replacement" and was not even described in the Reserve Study. A special Assessment would never have been approved by the members knowing that an engineering consultant deemed the French drains unnecessary.

Assigned is a vague term, my interpretation is that the Reserve Fund is or ought to be the total of the various capital-replacement accrued costs.

Your thoughts?

SheliaH (Indiana)
Posts: 6,964

Posted:

Generally, the reserve fund is the total of the various items, as you mentioned and there is no "unassigned cash" so it would appear these guys and gals didn't read the study, didn't understand what they read, or are making the mistake many boards do - using the reserves as a gigantic "slush fund" (someone used that term in another conversation on this website recently - I think the conversation is still there), but reserves should ONLY be used for major repairs and replacement of the common areas. One year you might use it for the road work you described, but if you're following the reserve recommendations, next year there should be enough to pay for something else.

Take a walk around your neighborhood and see if there are neighbors who feel as you do. If there are enough of you, you can go to the board and demand answers. Or rally the others to vote these folks out of office (or even a recall if they've done other things that are just as wasteful).

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

HenryS7 (Pennsylvania)
Posts: 336

Posted:

The installation of new French drains is an appropriate use of reserve funds in my state, per our reserve study. Since it is new and not a replacement, using funds in this manner does deplete the reserve funding faster than anticipated.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By JohnH38 on 02/07/2022 6:28 AM
Our board spent $150K to install unnecessary French drains and took the money out of the Reserve Fund, although it was not a "capital replacement" and was not even described in the Reserve Study. A special Assessment would never have been approved by the members knowing that an engineering consultant deemed the French drains unnecessary.

I would be asking more questions if an engineering consultant the board hired said the French drains were not necessary yet the Board went ahead and installed them. I suspect the engineering consultant's statement was not quite this black-and-white.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

John38

Many associations will name specific reserve items as opposed to general reserves. We have two reserve funds:
Roofing Reserves (largest amount)
General Reserves

BillD16 (Texas)
Posts: 971

Posted:

Our Reserve Study provided a table that provided recommended Reserve Fund levels for the next 30 years. If I were you, I would look to that table to see how other projects square with it.

FWIW, I’m the Treasurer on my Board and I share your concerns about that “whole big pot of money”.

(I think that there are innate human limits to the ability to project 20+ years into the future. But that’s just MHO).

BillD

HOA Board ex-President
Austin, Texas USA

“You can’t put too much water in a nuclear reactor”

JohnH38 (South Carolina)
Posts: 100

Posted:

The engineer that surveyed our roads even refused to write a report and accept the $3,500 offered for it.

The county P&Z director verified the road met all standards and could be conveyed/dedicated to the county w/o issues.

There is some water seepage after heavy downpours, it to be expected for depressed sections of any road.

The expenditure fore he French drains not being addressed in the reserve study should have been funded by a "special assessment" not from by depleting the "big pot" as was done
and it resulted in a substantial assessment increase, from $165 to $196 monthly, when combined with other unnecessary spending.

Most HOA owners (143) are apathetic, they come from the Northeast where they are used to much higher assessments!

Thank you.

AugustinD
Posts: 3,698

Posted:

JohnH38, options:

-- The best way to improve the performance of the Board is to run for election to it with a group of people who feel as you do. Hopefully you will win a majority.

-- You can try appearing at board meetings and/or writing a just the facts letter, without snarkiness and with extreme courtesy, and asking why the French Drains were installed when it appears the engineer that was consulted did not support installing French drains.

-- If per chance it crossed your mind to sue, then be aware that suing will not get what you want in a meaningful timeframe and at low expense.

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