Hidden Risks
Why "Percent Funded" Lies Without Live Accounting Data
The reserve study said 85% funded. Six months later, you're actually at 67%. Here's why static reserve studies mislead boards—and what real-time tracking looks like.
Every HOA board has seen the number: "Your reserve fund is 85% funded."
It comes from the reserve study—a professional assessment of how much money the association needs to maintain major components over time. The percent funded metric tells you how close you are to that target.
Except that number is probably wrong. And it's getting wronger every day.
The Reserve Study Snapshot Problem
A reserve study is a photograph, not a video.
On the day the analyst finished their work, the percent funded calculation was accurate. But that was months ago. Since then:
- Assessments were collected (money in)
- Reserve expenditures were made (money out)
- Emergency repairs happened (unexpected money out)
- Interest was earned (small money in)
- The reserve study's assumptions about timing shifted (reality vs. plan)
None of these changes are reflected in that "85% funded" number you're still quoting.
Why This Matters More Than Boards Realize
The percent funded metric isn't just a vanity number. It drives real decisions:
- Special assessment timing: When do you need to ask homeowners for more?
- Loan decisions: Should you borrow for a major project or pay cash?
- Disclosure requirements: What do you tell buyers about reserve health?
- Project sequencing: Can you afford to do the roof this year or next?
If your percent funded is based on stale data, every one of these decisions is compromised.
The Dangerous Gap: Study vs. Reality
Here's how reserve drift happens:
Year 1 - Reserve study completed: 85% funded - Actual reserve expenditures: $50,000 over plan - Real percent funded: 79% - Board still quotes: 85%
Year 2 - Reserve study still shows: 85% - Deferred a painting project (savings) - Emergency plumbing repair (overage) - Real percent funded: 72% - Board still quotes: 85%
Year 3 - New reserve study completed: 67% funded - Board shocked - Special assessment required
This isn't hypothetical. It's the standard pattern.
What Real-Time Reserve Tracking Looks Like
The alternative is surprisingly simple: connect the reserve study to the accounting system.
This means:
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Reserve balance is the actual balance - Not a spreadsheet estimate, but the real GL account balance.
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Expenditures update the calculation - When you pay for a roof repair, the system knows and adjusts percent funded.
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Drift triggers warnings - If actual spending diverges from the reserve study plan, the board sees it immediately.
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Entry-date correctness - Transactions affect calculations based on when they occurred, not when they were entered.
Real-time reserve tracking requires solving two hard technical problems that most HOA software ignores.
Problem 1: Ledger Integration
The reserve fund balance must come from the general ledger—the same source of truth that produces your financial statements. Many systems keep reserves in a separate tracking module that's manually reconciled with accounting.
This creates the "spreadsheet problem" where reserve tracking diverges from reality.
Problem 2: Component-Level Tracking
A reserve study doesn't just track total reserves. It tracks funding levels for specific components: roofing, painting, paving, elevators, etc.
When you make a reserve expenditure, the system needs to know which component it applies to. This requires:
- A component registry linked to the reserve study
- Expenditure validation against that registry
- Per-component funding calculations
- Automatic variance detection
Most systems track reserves as a single bucket. That's not how reserve studies work.
Problem 3: Temporal Correctness
If you enter a reserve expense from last month today, the system must correctly recalculate percent funded as of last month. The current balance isn't the only relevant number—the historical trajectory matters.
This requires what accountants call "entry-date" vs "posting-date" distinction, and most consumer accounting software doesn't support it.
What Boards Should Expect
A properly designed reserve tracking system provides:
- Current percent funded - Based on today's actual reserve balance, not a stale study
- Component-level status - Which components are underfunded, which are on track
- Variance alerts - Automatic warnings when spending diverges from plan
- Forecast accuracy - Projections that update with actual transactions
- Audit trail - Every transaction that affected reserves, with full provenance
The Real Risk: Disclosure
In many states, HOAs must disclose reserve status to prospective buyers. If you're disclosing a stale percent funded number, you may be providing materially inaccurate information.
This isn't just an accounting problem. It's a legal exposure.
The fix isn't getting reserve studies more often. It's having accounting software that keeps the calculation current.
See how CommunityPay tracks reserves in real-time, with component-level funding and automatic drift detection.
How CommunityPay Enforces This
- Reserve balance synced with general ledger in real-time
- Expenditures validated against component registry
- Percent funded recalculated after every transaction
- Drift warnings trigger when actual diverges from plan
CommunityPay · HOA Accounting Platform