RESERVES

Under Florida Statue 720.303(6)(b) where speaks on reserve accounts I want to understand that if the HOA operating budget includes a line item "Reserve Transfer" and the budget each year was funding that reserve transfer does that mean that there is a Reserve Account even if there is no line item schedule?
When the association was taken over from the developer the developer was also including in the budget for Reserves for Replacement of Capital Expenditures. For a period of of 9 years the BOD thru its management company provided to the membership a copy of the budget and the Reserve Schedule. From 2009 to current that procedure was not done, would that be acceptable or would it be a violation of the BOD & the Treasurer Fiduciary Responsibly.
Further from the way I read the statue the only ones that can modify and or transfer money from the reserves is by having an approval from the voting interest of the membership of the association, is that correct?

Raymond,

I am not in Fla. so I can't speak to the specifics of those statutes.

If the operating budget has shown a line for "transfer to reserves" and the year end financial statements show that the expense for that line item is equal to the budget, then indeed, there is a reserve account that is receiving those transfers.

You mentioned a reserve schedule. I assume you are referring to a list of items from the most recent reserve study that are projected to be replaced in the budget year. While the estimated replacement costs of such items figure into the calculation of how much needs to be transferred to the reserves each year, those details are not (in my experience) typically listed in the operating budget.

One question to ask is: where are the transferred reserve funds invested? Typically, the bulk of the reserve funds will not be needed for at least a few, and often, many years. Therefore, they should be invested to earn some interest to offset inflation in the eventual replacement costs. CIA best practices say that access to reserve accounts should only be possible with two board member signatures. If board members have signature authority on the reserve account, they should be able to provide you with the details.

David, yes you are correct the schedule I'm referring to is exactly as you described.

The funds are invested and are earning interest.

I guess what I need to know is that under the interpretation of the Florida Law buy the fact that the funds are moving from the operating budget earmark Reserve Transfer and into an interest bearing account is considered a Reserve Account as defined under Florida law.?

I believe that some of the BOD and Officers believe that can use these funds without approval from the membership.

'When the association was taken over from the developer the developer was also including in the budget for Reserves for Replacement of Capital Expenditures. For a period of of 9 years the BOD thru its management company provided to the membership a copy of the budget and the Reserve Schedule. From 2009 to current that procedure was not done, would that be acceptable or would it be a violation of the BOD & the Treasurer Fiduciary Responsibly. '

Raymond,

This is the most confusing law there is. Even the attorneys differ in their opinions. But yes, you are basically right. You must maintain 'fully' funded reservers unless the membership votes against it.

‘Further from the way I read the statue the only ones that can modify and or transfer money from the reserves is by having an approval from the voting interest of the membership of the association, is that correct?’

Transfer money from reserves to where? To the operating fund? Not sure what you mean.

Raymond,

Any monies received or spent through our operating account.

If we are going to spend x dollars on an item the reserves are to pay for, the money is transferred from the reserves into the operating account and spent on the specific item.

Our annual budget will actually show transfers between the accounts (all based on the reserve study).

Tim

Well, you need to do some kind of financial review. I can’t tell whether this transfer appropriate or not. As a rule, you can NOT transfer money from reserves to operating fund(s). Truly, that is a no, no.

I meant to say checking account like the "operating account"

Well that's not entirely true. Many times reserves are kept in a savings account or CD's. If its not transferred into some type of checking account like the reserves, it would be impossible to issue a check payment for a reserve expense. (Steve)
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Steve,
Florida law (coupled with By-laws) is very specific about co-mingling money. The type of accounts, whether CDs or Money Market etc. have nothing to do with it.

David, I may be wrong but I do not think this was the OP concern.