FINANCIAL RESERVES

Statement of Policy

It shall be the policy of this Homeowners Association that financial reserves be established and maintained in an amount which will cover anticipated major expenditures such as Maintenance (pool repair, building repair, etc.) and Exigencies (legal liability, etc.).

At the end of each fiscal year, it shall be the responsibility of the Board of Directors at the next meeting thereafter to review the financial status of the Association in respect to its nonprofit status in regard to Federal and State laws, and the needs of the Association for the next fiscal year. Adjustments to the reserves and/or income will then be implemented, based on the Board’s findings and after consultation with the Association’s CPA or financial consultant.

Implementation

9/9/86
Maintenance Reserves are established at $400.00 per month, or $4,800.00 per year. As of September 8, 1986, the Certified Public Accountant, who acts as a financial advisor, suggests that these reserves be increased to a total of $10,000.00 as soon as possible.

5/1/90
Maintenance Reserves are increased to $1,000.00 per month as of the fiscal year beginning
May 1, 1990.

11/21/91
Reserves for Exigencies is established at $400.00 per month.

Reserve for Capital Improvement Projects is established at $600.00 per month.

Prior Years’ Retained Earnings, which are surplus to current needs at year-end, April 30, 1992, shall be allocated to the Reserves for Exigencies and Capital Improvement Projects in appropriate amounts dependent on anticipated future needs.

Amounts previously included in Reserves set aside for Legal liability settlements and/or Security shall be included in the Reserve for Exigencies or eliminated from such reserves as of Year End April 30, 1992.

9/30/08
It shall be the policy of this Homeowners Association that already established financial reserves be documented (Reserve Schedule) and maintained which will cover anticipated major repair and replacement expenditures. Financial Reserves are to be structured as follows: Entrance Reserve, Clubhouse Reserve, Pool reserve, Deferred Maintenance Reserve, and Insurance Reserve.

Annual funding of the Reserves is to be determined by means of a formula that is based upon estimated useful life and estimated replacement cost or deferred maintenance of each reserve item.

The amount of the contributions to the reserve Accounts as disclosed on the preposed budget shall not be less than that required to ensure that the balance on hand at the beginning of the period for which the budget will go into effect plus the projected annual cash inflows over the remaining useful life of all the components that make up the reserve are equal to or greater than the full estimated replacement value. The projected cash inflows include reserve provisions and estimated earnings from investment of principal. In the event of a reserve shortfall, the membership of the association, upon a majority vote, in which a quorum is established, may provide for less reserves than required. In the event that a quorum is not established, the reserves, as included in the budget, shall go into effect.

Reserve provision may be adjusted annually to take into account any changes in estimates of cost or useful life of a scheduled reserve item. Any such adjustments must be documented on the Reserve Schedule, and, as part of the annual budget process, should be reviewed with the Association’s CPA or financial consultant.

Use of Maintenance, Repair, and replacement Reserve Funds is restricted to those components detailed on the Reserve Schedule. Any use of Reserve Funds for purposes other than what is detailed on the Reserve Schedule REQUIRES MEMBERSHIP APPROVAL.