Removing the Disconnects from the Reserve Study Process

The first step is to establish reserve policies - The Association should take control of the reserve study process by establishing reserve policies that address the following matters:

Identification of Association maintenance responsibilities

1.      Governing documents

2.      State statutes (if applicable)

3.      Common industry practices

4.      Agreements with members or third parties

Budgeting policies

1.      Reserve budget

2.      Operating budget

3.      Budget to actual comparisons

a)      Frequency of reports

b)      Who must review

c)      Policy on variance analysis

d)     Policies on follow up procedures

Description of reserve maintenance plan

1.      Policies identifying reserve components

2.      Policies of replacement cycles

3.      Purchasing policies

4.      Policies on use of maintenance staff versus outside contractors

5.      Description of effect of operating maintenance activities on replacement activities

Description of operating maintenance plan

Funding policies

1.      Percent funded goals

2.      Policies on inclusion or exclusion of investment income

3.      Policies on inclusion or exclusion of income taxes

4.      Effect of selection of tax form to file – tax status

Investment policies

1.      Policies on segregation of reserve and operating funds

2.      Policies on capital reserves versus non capital reserves

3.      Policies on approved investment vehicles

4.      Policies on selecting investment broker or banker

Cash handling procedures

1.      Who may authorize expenditures

2.      Who may sign checks / authorize transactions

3.      Bank reconciliation procedures

4.      Review and approval of bank reconciliations

 

Facilities Advisors, Inc. provides its clients with model reserve policies to help start the process.  Please contact us if you would like a copy of our reserve policies.