Operating vs Reserve Fund in Virginia HOA

Hi Daniel,

In an HOA, operating funds and reserve funds should always be kept separate to ensure financial transparency and compliance with best practices. Operating funds cover the association’s day-to-day expenses, such as utilities, maintenance, insurance, and management fees. Reserve funds, on the other hand, are designated for long-term capital improvements and major repairs, such as roof replacements or structural work.

Mixing these funds can lead to financial mismanagement, making it difficult to track spending and potentially violating state laws or HOA governing documents.Additionally, reserve funds should not be used to cover operating shortfalls unless explicitly authorized by the board and in accordance with the HOA’s governing documents.

In Virginia, reserve studies are required. You may find more information on reserve fund laws in Virginia here.