How Strong is your Reserve Fund?
July 16, 2012 No Comments
Reserve studies are required by Hawaii State Law, HRS 514A and HRS514B-148 for Condominiums and Time Share property under HRS 514E-10.3.
Reserve studies are required by Hawaii State Law, HRS 514A and HRS514B-148 for Condominiums and Time Share property under HRS 514E-10.3.
The Hawaii Act defines a Full Replacement Reserve as the reserve funds for an asset equal to: The projected capital expenditure or major maintenance required for the asset at the end of its estimated useful life;
It’s getting to be that time of year when most Community Associations begin the annual process of planning and adopting next year’s financial budget. For associations small and large, whether condo, HOA or otherwise, this is arguably the most difficult and most important task that Boards and their Managers will tackle in the course of doing business.
After the Component List has been created or updated, the current Reserve Fund Strength and a recommended Funding Plan are calculated. The Funding Plan typically takes the form of a recommended monthly Reserve contribution. This “action plan” is developed to take the Reserve Fund from its current condition to the Funding Objective. But the question remains, which Funding Objective, and why?
There once was a man with one foot in a bucket of scalding hot water and one foot in a bucket of ice water. When asked how he felt, he said “On the average, I feel just fine!” With that illustration clearly warning you of the limitations of discussing averages, how much should your Reserve contributions be?
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