Condo Association Management Blog

As the treasurer for my condo I would show where the money was spent and if this caused a shortage in another area then so be it. It sounds as if the budget for 2010 needs to better take into account the financial situations you mentioned. Also we have an operational savings account along with our reserve account which has a balance of roughly two months of operating expenses for these types of situations. I would suggest funding one of these as well. 
 

Like Mark said, the fact that you went over budget for 09 isn't necessarily a big deal. Reserves can be used to fund operational shortfalls. However, the danger comes when you consistently use your reserves to fund operations because of poor planning. 09 kicked a lot of associations in the pants and now you know what expenses you'll have. You should have a good guide to increase assessments for 2010 so you will actually be able to fund your reserves. Make sure you update your reserve study since you didn't have any contributions in 09. You'll likely need to increase your reserve contribution to make up for losing the 09 contributions. 
 
Darron Hay 
 
HOA Receivables Management, LLC

In Florida, condo unit owners do not get to vote on the yearly budget. Period. 
Setting the budget is a board responsibility, but a good board would communicate well and provide reasons along with the budget numbers. By law,(Florida 718)the Board has to propose 'full reserves'(hard to define!),and then the owners are usually given the chance to vote for a lower, partial amount going into their reserves., say 50 or 60%. There's a BIG 'but'... that is, there must be a clear warning on the ballot paper of the risk of a special assessment in the future if reserves are under-funded and the need arises.  
Your board needs to do that.  
At least half of 'the voting right' of the association (owners) have to vote otherwise it's a no-vote.  
A special meeting must be called for the purpose, to validate, count and declare the result of the votes cast both by proxy and by those present.This should be done ahead of the Annual meeting when the board's budget is likely to be formally on the agenda.  
The Reserve is really a savings account to pay for expenses of more than $10,000 that do not occur on a yearly basis , e.g., replace roofs, paint buildings, renew road surfaces, that kind of bigger, periodic item. The method works best when an estimate of the cost of carrying out such renewal works is done routinely every year, ahead of the budget -setting.  
John C.

Our association did fund reserves, just not to the amounts our budget desired. Is there a legal issue if we end 2009 with less money going in than anticipated? Do we need to pay it back in 2010, or start over in 2010 knowing that we need to allocate more, especially since we are over 100% funded?

JT: 
 
I'm not a lawyer so this is in now way legal advice. However, I would think that since you paid money towards your reserves you would be fine from a legal liability standpoint. In WA, THAT you have reserves and contribute to them is far more important than the amount. It would also seem that if you are 100% funded on your reserve account, you wouldn't necessarily have to add additional funds. In most cases, reserves can be used to cover operating shortfalls on a temporary basis. 
 
Darron Hay 
 
HOA Receivables Management.

Can a condo association Board of Directors take the Reserve Fund down to "zero" bu using those Reserve funds for day to day operational expenses?

In Florida, your Association Board must propose full reserves in the annual budget. Only the members (the owners) can then vote to fund less, i.e. partial reserves.  
 
The partial amount / % is not specified.  
 
John C.

Where can I find a layman's guide on accounting requirements for reserve funds. Specically, changes from one year to the next and when to delete a reserve item, i.e. capital improvement once it is complete and not an item required by ss 718?