Re: contingency fund questions
From: evdavwes (evdavwesaol.com)
Date: Thu, 12 Nov 2009 04:20:13 -0800 (PST)
Hello,


Westwood Cohousing currently has a "General operating reserve fund" (GORF) 
which is specified in our bylaws.  We did not fund this until about 3 years 
ago.  Previous to that, we had a practice of refunding to members any surplus, 
often by skipping a month's assessment the following year.  We have tended to 
have surpluses most years (usually 5 to 15%).  Last year's deficit was the only 
exception so far.   Because we had a General operating reserve by that point, 
we were able to spend from the reserve rather than require a special assessment 
to make up the difference.


We dug up some advice about how much to fund it with, and I believe it was 10 
to 15% of the "budget" (I don't remember whether this was the operating budget 
or the total budget, including the reserve fund contribution).  I have seen 
(but can't find now) bylaws of a conventional HOA where the Board is directed 
to maintain a GORF of between 2 and 4 months assessments (assessments by 
definition include both operating and reserve portions), and to refund to 
members any surplus beyond that amount.  


By the way, we are Board-governed, and it is generally assumed that the 
decisions about reserves and how to spend them will be made by the Board, 
rather than as a community.  In a Board-governed HOA, the rules by which the 
Board operates are usually contained in the bylaws and other "Governing 
documents."


Here is a link to a professional article covering this topic (which recommends 
a GORF of 10% of the operating budget (which I would guess does not include the 
reserve fund contribution), with a minimum of $10,000).


http://www.associationtimes.com/articles2006/operatingreserve1106.htm

David Clements
Westwood Cohousing, Asheville, NC

-----Original Message-----


Message: 1
Date: Tue, 10 Nov 2009 22:18:00 -0800
From: Jodi Coleman <jodicoleman1000 [at] gmail.com>
Subject: [C-L]_ contingency fund questions
To: cohousing-L [at] cohousing.org
Message-ID:
    <3ef4d8db0911102218y5dbc7eb8ie64af50e92717ee0 [at] mail.gmail.com>
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Hello all,


Last year (our second since moving in), our community created a contingency
fund for unexpected and emergency expenses.  We took the excess from our
first year's budget (and the excess from each budget thereafter) to create
the fund.  We created the contingency fund so that each work team wouldn't
feel the need to have a sizeable miscellaneous/emergency line in their
section of our budget, and instead they would know that money could be
available to them if they needed it.  Going into our third year, we now have
a healthy amount of money in this fund, so we are now needing to decide
where to cap it.



We are wondering how much money (what percent of the budget) other
communities have in their contingency funds.  I have read that several
places have 10% of their budget as a contingency fund.  Is this 10% of your
operating budget, or is this the whole budget including any additions to the
maintenance reserves?  Have folks found your systems to be adequate?  Any
advice folks have would be greatly appreciated!



Jodi Coleman

Coho Cohousing, Corvallis, OR


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