Association Accounts – Operating and Reserves

In a typical association management financial package, you will see two main accounts on the balance sheet: the Operating Account and the Reserve Account.  Below is a helpful list of what each of these accounts are and what they are used for.

Operating-Account-Reserve-Accounts-Homeowners-Association-magnifying-glass-over-profit-loss-statement

Operating Account:

  • Can be described as the association’s “checking” account – used for the day-to-day and routine bills.

    • Small general maintenance

    • Monthly or quarterly utilities

    • Insurance premiums

    • Contracted services such as management, landscaping, security, etc.

Reserve Account:

  • More like the association’s “savings” account to be used for the long term and larger ticket repairs or replacements in the community. 

    • Roof replacements on common area buildings

    • Asphalt or concrete replacements

    • Pool equipment replacements

    • Large scale landscaping replacements

  • Should be funded in accordance with the associations Reserve Study, or generally recommended 25% - 40% of annual association income.

  • In accordance with Minnesota Statute 515B.3-1141 the association “shall keep the replacement reserves in an account or accounts separate from the association's operating funds, and shall not use or borrow from the replacement reserves to fund the association's operating expenses..” 

For more information on your association bank accounts, how to read your associations financials, or any tips for maintaining a healthy reserve account, feel free to reach out to us!

Mark Zubert