Reserve Funds -- A Tip

Started by GrahamO • 5 replies • 1243 views

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GrahamO (Ontario)
Posts: 55

Posted:

Here's an idea you may find interesting. Boards of Directors frequently assign specific duties to individual Board Members. There are positions for Financial matters, Social Events, Newsletters, Correspondence with unit-owners, and so on. My focus is on reserve funds which leads me to suggest that it may be a good idea to consider appointing one of the Board Members to oversee matters that relate to the operation of the reserves. The investments of balances, the requirements for repairs, the funding adequacy as things change over time. Reserves are important and they deserve to have someone dedicated to the job of keeping an eye on them.

The Board Member assigned to this should be ... comfortable with building maintenance issues, pretty good with figures (dollar-figures), and not too bad with computer skillls, I belive.

That's it! Please post a reply with your reaction to the idea. Add other wrinkles if you think of some, as well.

JS1 (Nevada)
Posts: 30

Posted:

Our HOA is going through the annual reserve study review - And found that the previous board chose to delete some components from the study so that they could justify lowering the assessment (all without a meeting, notice, etc.)

So this board, is putting everything into a resolution, with all the "because", "whereas", siting law, expert opinion, and all things taking into consideration for the business judgment decision for this board and all future boards so that we don't end up playing a shell game with the components.

Just another suggestion on reserve studies, because you probably won't have someone there with institutional history in 30 years, - write it down.

GrahamO (Ontario)
Posts: 55

Posted:

Your suggestion is, indeed, a good one JS1. I intend to post a "tip" once every couple of weeks or so, and I'll be sure to include yours in one of my future ones. By the way, I thought I'd "heard everything" -- but deleting components to eliminate future expenditures' predictions? That beat's them all!

GeraldT4
Posts: 1,022

Posted:

JS1 & GrahamO - I don't want to "hijack" the posts original topic but would like to ask the question of JS1 - What components were deleted and what were the estimated useful life-spans of those elements deleted?

SusanW1 (Michigan)
Posts: 5,202

Posted:

I don't think there's anything "unusual" about adjusting the Reserve Fund catagories. The RF should be re-evaluated every 3 - 5 years anyway. What if something got sold or replaced or it was determined that the expenditure was really an annual maintenance cost. Without knowing the particulars, we can't determine if something was fishy.

GeraldT4
Posts: 1,022

Posted:

SusanW1 - True we don't know the specifics. Questions asked and no answers as of yet. However, this is about deleting line items. My question to JS1 was "What components were deleted and what were the estimated useful life-spans of those elements deleted?:. This is very important. For example, all the elements the association is obligated to replace should be listed in the reserve fund tables. If the life-span of any of those elements exceeds say 30 years, the association BOD and or the community may choose to only fund for the replacement costs that fall within the 30 year range.

In my COA the Association BOD by vote chose to reduce the amount set aside in reserves for townhouse roofs to only fund for an overlay of existing shingles rather than removal of the old and replacement with new. That tactic significantly reduced the total estimated replacement cost. However, it was a decision that was knowingly made, and not a good one. Caution and advice was recommended by our Reserve Engineering Firm that the Association should be made aware the geometry/profile of the roofs would be affected. Additional caution was given that their may be underlying issues with roof systems that won't be addressed if an overlay was done. Oh well, all my recommendation and caution was for naught, so goes association living.

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