Quote:
Posted By KirkW1 on 10/06/2008 5:47 PM
If you don't already have one, this should be the start of your reserve fund. And you should consider getting a reserve study. That will tell you how much you need. And it will make recommendations on how much should be put in. The idea is to have the money to deal with the major expenses that you know will come around. For instance, if you have a club house you know that eventually you will have to replace the roof. This would be a line item and you put enough back each year that when the roof needs replaced you have the money without having a special assessment.
Kirk,
I agree with your suggestion of starting a reserve fund with the "working capital" and to also get a reserve study. However, I'm not quite sure about your example to show a reserve fund item as a line item in the budget. This is the way my assn shows reserve deposits and expenditures (our manager's co. does our financials; our treasurer is a CPA):
Transfer to Reserves is shown as a credit to Income.
The anticipated reserve expenditures are not shown as line items in the budget. However a separate statement is prepared outlining the anticipated reserve spending for the year.