Jan 2025 Post
Did We Get An Accurate Asset Reserve Study or NOT? You Decide...
Researched By A Fellow Homeowner
Email Correspondence between a Concerned Homeowner and the CAI (Community Associations Institute) 'Facilities Advisors' firm from Las Vegas, NV, who handled the recent 2024 SCOV Asset Reserve Fund Study.
(Note the connection here of CAI Members controlling our HOA. This CAI member traveled from Las Vegas, NV to study our Community. He may have his own interpretation on how a Community like ours ought to be funded in its Asset Reserves, which differs from the norm in AZ. Why are we hiring companies from out of state and not locally?)
Email from a Concerned Homeowner, sent to the CPA of Facilities Advisors:
Jan 8, 2025
Good morning:
Yesterday at a meeting in our HOA community, a representative from your firm discussed our recent Asset Reserve study report.
He made a statement that I would like clarification on. He said most HOA's don't have a required funding % age for their Asset Reserve funds. I am wondering if that is because most HOA's don't have a lot of amenities to maintain. We have a restaurant, golf course, bistro, tennis and pickleball courts, mini-golf course, a gym, many art studios and more. I would imagine that would require a funding % age to ensure the financial stability of all these amenities. Referencing the website below, it states the required amount funded should be 70% to 100%.
https://www.propfusion.com/post/hoa-reserves-rule-of-thumb-everything-you-need-to-know?fbclid=IwZXh0bgNhZW0CMTAAAR0tOkuU98RGWrZPSs9lRzJR2LE3TqOAiaG8pzLzQEg_vNhAIDwXa8X3kLI_aem_BkeGLo7o5rL1TH-GHFgE8Q
Also, the figure that the Asset Reserve study started with was a balance that included money owed to the fund (over a million) due to the commercial purchase of the Copper Building. Your representative agreed that we should use the “Available Cash” balance.
Myself and other Homeowners are worried about these two things and I am hoping that your CEO can clarify these them. We are a group of seniors on fixed incomes and having accurate and stable financial information is very essential to us and our HOA at this stage in life.
Signed, A Concerned Homeowner
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Email response from CPA of the 'Facilities Advisors Company':
Jan 10, 2025
The question on “what is the starting balance?” comes up infrequently only because it is rare that any assets or liabilities other than cash or investments exist. This is more common for larger, complex associations than smaller associations with a relatively simple financial structure. Please see our position paper attached that provides a comprehensive discussion of this issue.
Please see the attached position paper on percent funded. While I understand what people are trying to communicate with the oft-repeated statement that 70% funded is good, I don’t adhere to that concept.
Cash flow is the only thing that matters, and as long as a funding plan does not run out of money it is acceptable to us. It is the association’s policy that drives funding goals. Only of my large association clients with nearly $100MM in components has a goal of trying to reach 60% funded within the next five years. Even given that modest goal their cash balance never drops below $3MM at any point during the 30-year projection period.
Click here for .pdf on "Calculating Reserve Fund Starting Balance"
Click here for .pdf on "Percent Funded"
Please let me know if you have any questions.
~ CPA Representative of 'Facilities Advisors Company'
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