emergency fund in budget planning

I was wondering if HOAs usually set aside some money for emergency situations as part of budget planning.

I am thinking of "emergency" that is beyond insurance coverage.

If we don't do that, I guess we can borrow from reserves. But there are some rules for returning that money to reserves.

In some HOA seminar, I heard the term: diverting from reserves, which is different from borrowing. This means that HOA may not contribute to reserves for say a few months to cover some unforeseen event that affected your operating budget. Does anyone have any thoughts around that.

As a last resort I guess there is always an unpopular option of special assessment.

Peter I'm curious.....just what does that line item say for collecting those extra funds for non-paying owners? Does it say: Deadbeat dues? I'm not being a smart aleck....but if some people will think they're "covered" for not paying their fees, are there more people taking advantage of that and skipping payments?

Thank you.

Our auditor, in a previous year's audit report recommended that the HOA develop an "operating contingency" of between 10 to 20% of the operating budget. This contingency is now a budget line item and is separate from the replacement reserves. It is intended to cover such "known unknowns" as an unexpectedly large snowfall which exceeds the budgeted snow removal amount. So far we have not had to tap this operating contingency. Once it reaches a level we feel comfortable with, we will stop funding it and just carry it forward.

Before you do this, check your documents and any state law on the matter. For instance our documents used to require that any leftover assessments be returned to the H/O in the form of lowered assessments until the leftovers were gone; a change in state law now allows the BOD to either return the funds or move them into reserves. Return or reserves nothing else; which is not to discredit Mary's advice; you just might have to move the funds before year end so there are no leftovers. Our documents also require the BOD to maintain a separate contingency account equal to two months of assessments.

SPAM POST REMOVED

"Contingency"is what I use. It's a catch all for any unforeseen expense that is not accounted for in normal operating expenses and not something you reserve for. You could as you say "diverting from reserves" or abate a part of your reserves and add it as a contingency item to your Budget. People want to know upfront where their dues are going. Once you start diverting from reserves you start to lose full transparency. Just my opinion.

Your missing that this thread is 3 years old and that it was only reactivated by JoeyS to SPAM the forum about payday loans.