No reserve fund set up

Started by BeckyF2 • 5 replies • 1764 views

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BeckyF2 (Oregon)
Posts: 3

Posted:

I have taken on the duties of treasurer for a 78 lot development that has been in existence since 1999. I had to input three years worth of banking and expense info. to bring them into the current century. There is no separate account as a reserve fund. All the monies are in the operating fund. I am still trying to piece together the g/l totals to figure out how much should be in there. I don't think I will be able to give completely accurate totals as I only had limited info. According to the reports I've put together so far it shows there should be 66k in the reserve and we only have 28k in the operating account.
Also, we have a rogue faction in our group who are stirring up stuff from years ago and acting like it is the fault of the current board. They had no info. prior to my coming on board for the finances and act like I had something to do with that. I am giving them what they couldn't get before. Should I let them know exactly what's up with the finances? or sugarcoat it a bit untill a reserve account has been opened? Thanks. Becky.

SusanW1 (Michigan)
Posts: 5,202

Posted:

There must be some guidelines as to how the RF is set up. The best thing you can do is to follow the guidelines. (Our bylaws say that 66% of all dues collected must be placed in the RF) that's pretty objective.

So there's no "sugar coating" about it. I suggest that you request a Finance Committee be established ASAP to get a handle on the finances and to establish clear and concise procedures.

Organizing the finances and determining how much goes where is not your job alone. Get some help, so you are not the only one in the cross-hairs.

TimB4 (Tennessee)
Posts: 21,047

Posted:

Becky,

Reserve funds don't have to physically be in a different account (unless your State laws or governing documents require it).

Make a line item called Reserves and account for it.

Hope this helps,

Tim

MaryA1 (Arizona)
Posts: 7,043

Posted:

Tim,

Sorry, but this is not the proper way to account for reserve monies. Those monies should be put into a separate bank account, preferrably an interest bearing account.

The only reserve info that should be in the budget is the amount that will be transferred into the account during the year. This is generally shown as a credit figure in the income portion of the budget. The expenditures are not operating expenses and should not be budgeted for in the operating budget. A separate reserve budget can be prepared or the anticipated expenses from the reserve account can be shown at the bottom of the operating budget.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Becky,

Well, the reason the operating account only has $28K but there should be $66K in the reserves alone could be accounted for in many different ways. Suffice it to say that is the reason why the two accounts should be separate. Then you would know exactly how much has been deposited into the reserve account and how much has been spent from the reserve account. By co-mingling the two making that determination becomes more complicated and may be near impossible if accurate records have not been maintained over the years. I would suggest just starting from scratch. Establish a reserve account by opening a new account and depositing a small amount (say $1,000) just to establish the reserve account. A reserve study should be performed to determine exactly what items are to be contained in the reserves and how much should be deposited into the account each year. Then budget to deposit XX number of dollars each month into the reserve account.

Frankly I would not pay much mind to this "rogue faction" and would certainly not "sugarcoat" anything. But, if you do want to answer their questions, just give them the facts.

TimB4 (Tennessee)
Posts: 21,047

Posted:

Mary,

I agree that a separate account is the best way. I had the impression that Becky was getting resistance in doing that. Therefore, unless a separate account is required by her State or documents, I was offering a method that could still account for the funds.

Tim

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