Does My Association Include Fully Funded Reserves in Its Proposed Budget?

With the budget season approaching, many condominium associations may wonder how to prepare a budget when it’s anticipated that members will vote to waive or partially fund reserves. The board must create a proposed annual budget that includes estimated revenues and expenses. In addition to annual operating expenses, Section 718.112(2)(f)(2)a, Florida Statutes, requires the proposed budget to reserve money for roof replacement, building painting, pavement resurfacing, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. Reserves are calculated based on a formula contained in the Florida Administrative Code, designed to accrue money over the useful life of the individual assets so that the association is not forced to impose special assessments to repair or replace the assets. Budgeting for reserves is complex because it requires estimating the remaining useful life of the building components, their future replacement cost, and accounting for the funds previously saved. The association should retain a reserve specialist to produce a reserve study periodically and work with its accountant to budget for reserves.