Fine revenue
Hello Dennis,
I have a question concerning fine money. These are funds because a builder built a home outside of the building envelope. 3 times. He was fined $45,000.
My question is how should these finds be handled for accounting purposes. Our board wants to deposit it into our capital reserve fund, but there has not been any projects budgeted or approved.
Thank you, R. Gordon
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Rosalie,
The money gather from fines can be used by the association to reduce the common expense assessments for the homeowner by placing the money in the operating account. (Not recommended by me because it will most likely result in excess funds at the end of the year and then you have to figure out how you can address those funds separately. The association is also free to place that money into any reserve account for the long-term Maintenance and upgrade of common property irrespective of the identification of specific projects. While I strongly recommend that you establish a long-range plane for your community so that you can understand the reasonable major maintenance cost for your community and plan for the funding of those expenses thru regular annual contribution to the reserve accounts, nothing requires you to first identify specific projects before you can start saving to pay for those projects.
Dennis