Haw. Code R. § 16-107-66 - Fund accounting for each part of the association property; use of separate funds for other than stated purpose

(a) An association shall establish at least one reserve account for its replacement reserves. Within the replacement reserve account, however, the association shall establish a separate designated fund or funds for each asset for which estimated capital expenditures or major maintenance will exceed $10,000. Replacement reserves for all assets for which estimated capital expenditures or major maintenance will not exceed $10,000 may be aggregated into a single designated fund in the replacement reserve account.

(b) For each of the separate, designated funds, the association's records for the replacement reserve account shall state:

(1) The purpose of each fund or the asset for which it is established; and

(2) The amount of the replacement reserves allocated to each fund; provided, the association need not comply with paragraph (1) for the single, aggregated fund. Instead, the replacement reserve account records may state the purpose of the fund as "miscellaneous," or a similar term, and indicate the amount in the aggregated fund. Regardless, elsewhere in its records the association shall list the assets for which the aggregated fund is established.

(c) The association board shall use replacement reserves allocated to a particular fund only for the stated purpose of that fund, except:

(1) In an emergency or emergency situation the board may use the replacement reserves in any fund for any legitimate association purpose, provided the board passes a resolution containing written findings as to the necessity of using the replacement reserves for other than their designated purpose, the necessity of the expense involved, and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to all members of the association; and

(2) The board may at any time use up to fifty per cent of the amount in any fund in the replacement reserves for the stated purpose of any other fund. In such a case, the association records, including but not limited to board meeting minutes, shall indicate the change in use of the fund and the dollar amount of the fund used for another fund, and the board need not comply with the procedures of section 514A-83.6(f), HRS, for notice to owners.

(d) If a board collects less than one hundred per cent of the association's estimated replacement reserves, the association's reserve account records shall clearly indicate how the board has allocated those reserves among each of the separate, designated funds. The board may fund each of the designated funds by an equal percentage, fund them by varying percentages, or fully fund some and not fund others at all. Regardless of the option chosen, the reserve account records must accurately indicate the allocation of funds adopted by the board.

Notes

Haw. Code R. § 16-107-66

[Eff 1/2/95] (Auth: HRS §§ 514A-83.6, 514A-99) (Imp: HRS § 514A-83.6)