What your CPA does and does not do
Your CPA reports reserve balances and activity in the financial statements and makes sure the required disclosures are there. Your CPA does not perform reserve studies, structural integrity reserve studies (SIRS), milestone inspections, or any engineering work, and does not judge a building's condition. A SIRS applies only to condominium buildings three habitable stories or higher.
Estimates of useful lives and replacement costs come from the association: its reserve study, its SIRS (for a condominium building three habitable stories or higher), or the board's own estimates. The financial statements report them. They do not replace them.
Fund accounting
Florida's condominium rule requires financial statements on the accrual basis using fund accounting, under generally accepted accounting principles. Fund accounting separates the association's resources by purpose:
- Operating fund: day-to-day revenues and expenses, such as insurance, utilities, management, and routine maintenance.
- Reserve fund: amounts set aside for capital expenditures and deferred maintenance.
The required statements include a statement of changes in fund balances, so owners can see how each fund moved during the year.
Condominium reserve requirements
A condominium's budget must include reserve accounts for roof replacement, building painting, and pavement resurfacing. It must also include reserves for any other item whose deferred maintenance or replacement cost exceeds $25,000, or the inflation-adjusted amount set by the state, whichever is greater. Amounts are based on each item's estimated remaining useful life and replacement cost.
A SIRS applies only to condominium buildings three habitable stories or higher. An association that must obtain a SIRS for such a building must reserve for the items the study covers, based on its findings and recommendations.
Waiving or reducing reserves
Condominium owners may vote to provide no reserves, or less than the statute requires. The vote needs a majority of the total voting interests.
There is a significant limit. For budgets adopted on or after December 31, 2024, a unit-owner-controlled association that must obtain a SIRS (that is, one with a condominium building three habitable stories or higher) cannot waive or reduce reserves for the SIRS items. The statute has limited exceptions, including a multicondominium association using an alternative funding method approved by the state and an association that votes to terminate the condominium. Ask your association's attorney whether an exception applies.
A waiver affects the budget. It does not remove the reserve disclosures from the financial statements (see below).
Straight-line and pooling
Florida recognizes two ways to fund condominium reserves:
- Straight-line: each reserve item is funded on its own, based on its remaining useful life and replacement cost.
- Pooling: reserve items are combined in a pool and funded together.
The board can change the accounting method for reserves to pooling or straight-line without a vote of the owners.
The method affects the disclosures. The statute's good-faith estimate of the annual amount needed to fully fund each reserve item is based on the straight-line method and does not apply to reserves funded through pooling.
These descriptions are simplified. Confirm with your association's attorney how its governing documents and the statutes apply to its reserve funding method.
Reserve disclosures
For condominiums, Rule 61B-22.006 requires reserve disclosures regardless of whether reserves have been waived. They include:
- The beginning balance, additions, expenditures, and ending balance of each reserve account.
- The amount of annual funding required to fully fund each reserve account, or pool of accounts, over the remaining useful life.
- The method used to estimate the funding, and the date the estimates were last made.
- The policy for allocating interest earned on reserves.
- Whether reserves were waived.
HOA reserves
HOA reserves are governed by s. 720.303(6). If the association's budget does not provide for statutory reserves, each annual financial report must contain a statement in conspicuous type saying so. It begins: "THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR FULLY FUNDED RESERVE ACCOUNTS."
A parallel statement applies when the association keeps limited voluntary deferred expenditure accounts that were not created under the statutory reserve provisions.
The full text of the subsection on budgets follows. Confirm with your association's attorney how it and your governing documents apply to your association.
(6) BUDGETS.—
(a) The association shall prepare an annual budget that sets out the annual operating expenses. The budget must reflect the estimated revenues and expenses for that year and the estimated surplus or deficit as of the end of the current year. The budget must set out separately all fees or charges paid for by the association for recreational amenities, whether owned by the association, the developer, or another person. The association shall provide each member with a copy of the annual budget or a written notice that a copy of the budget is available upon request at no charge to the member. The copy must be provided to the member within the time limits set forth in subsection (5).
(b) In addition to annual operating expenses, the budget may include reserve accounts for capital expenditures and deferred maintenance for which the association is responsible. If reserve accounts are not established pursuant to paragraph (d), funding of such reserves is limited to the extent that the governing documents limit increases in assessments, including reserves. If the budget of the association includes reserve accounts established pursuant to paragraph (d), such reserves shall be determined, maintained, and waived in the manner provided in this subsection. Once an association provides for reserve accounts pursuant to paragraph (d), the association shall thereafter determine, maintain, and waive reserves in compliance with this subsection. This section does not preclude the termination of a reserve account established pursuant to this paragraph upon approval of a majority of the total voting interests of the association. Upon such approval, the terminating reserve account shall be removed from the budget.
(c)1. If the budget of the association does not provide for reserve accounts under paragraph (d), or the declaration of covenants, articles, or bylaws do not obligate the developer to create reserves, and the association is responsible for the repair and maintenance of capital improvements that may result in a special assessment if reserves are not provided or not fully funded, each financial report for the preceding fiscal year required by subsection (7) must contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR FULLY FUNDED RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS REGARDING THOSE ITEMS. OWNERS MAY ELECT TO PROVIDE FOR FULLY FUNDED RESERVE ACCOUNTS UNDER SECTION 720.303(6), FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A MAJORITY OF THE TOTAL VOTING INTERESTS OF THE ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY WRITTEN CONSENT.
2. If the budget of the association does provide for funding accounts for deferred expenditures, including, but not limited to, funds for capital expenditures and deferred maintenance, but such accounts are not created or established under paragraph (d), each financial report for the preceding fiscal year required under subsection (7) must also contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION PROVIDES FOR LIMITED VOLUNTARY DEFERRED EXPENDITURE ACCOUNTS, INCLUDING CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE, SUBJECT TO LIMITS ON FUNDING CONTAINED IN OUR GOVERNING DOCUMENTS. BECAUSE THE OWNERS HAVE NOT ELECTED TO PROVIDE FOR RESERVE ACCOUNTS UNDER SECTION 720.303(6), FLORIDA STATUTES, THESE FUNDS ARE NOT SUBJECT TO THE RESTRICTIONS ON USE OF SUCH FUNDS SET FORTH IN THAT STATUTE, NOR ARE RESERVES CALCULATED IN ACCORDANCE WITH THAT STATUTE.
(d) An association is deemed to have provided for reserve accounts upon the affirmative approval of a majority of the total voting interests of the association. Such approval may be obtained by vote of the members at a duly called meeting of the membership or by the written consent of a majority of the total voting interests of the association. The approval action of the membership must state that reserve accounts shall be provided for in the budget and must designate the components for which the reserve accounts are to be established. Upon approval by the membership, the board of directors shall include the required reserve accounts in the budget in the next fiscal year following the approval and each year thereafter. Once established as provided in this subsection, the reserve accounts must be funded or maintained or have their funding waived in the manner provided in paragraph (f).
(e) The amount to be reserved in any account established shall be computed by means of a formula that is based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates of cost or useful life of a reserve item.
(f) After one or more reserve accounts are established, the membership of the association, upon a majority vote at a meeting at which a quorum is present, may provide for no reserves or less reserves than required by this section. If a meeting of the parcel owners has been called to determine whether to waive or reduce the funding of reserves and such result is not achieved or a quorum is not present, the reserves as included in the budget go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves. Any vote taken pursuant to this subsection to waive or reduce reserves is applicable only to one budget year.
(g) Funding formulas for reserves authorized by this section must be based on a separate analysis of each of the required assets or a pooled analysis of two or more of the required assets.
1. If the association maintains separate reserve accounts for each of the required assets, the amount of the contribution to each reserve account is the sum of the following two calculations:
a. The total amount necessary, if any, to bring a negative component balance to zero.
b. The total estimated deferred maintenance expense or estimated replacement cost of the reserve component less the estimated balance of the reserve component as of the beginning of the period the budget will be in effect. The remainder, if greater than zero, shall be divided by the estimated remaining useful life of the component.
The formula may be adjusted each year for changes in estimates and deferred maintenance performed during the year and may include factors such as inflation and earnings on invested funds.
2. If the association maintains a pooled account of two or more of the required reserve assets, the amount of the contribution to the pooled reserve account as disclosed on the proposed budget may not be less than that required to ensure that the balance on hand at the beginning of the period the budget will go into effect plus the projected annual cash inflows over the remaining estimated useful life of all of the assets that make up the reserve pool are equal to or greater than the projected annual cash outflows over the remaining estimated useful lives of all the assets that make up the reserve pool, based on the current reserve analysis. The projected annual cash inflows may include estimated earnings from investment of principal and accounts receivable minus the allowance for doubtful accounts. The reserve funding formula may not include any type of balloon payments.
(h) Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum is present. Prior to turnover of control of an association by a developer to parcel owners, the developer-controlled association shall not vote to use reserves for purposes other than those for which they were intended without the approval of a majority of all nondeveloper voting interests voting in person or by limited proxy at a duly called meeting of the association.
(i)1. While a developer is in control of a homeowners’ association, the developer may, but is not required to, include reserves in the budget. If the developer includes reserves in the budget, the developer may determine the amount of reserves included. The developer is not obligated to pay for:
a. Contributions to reserve accounts for capital expenditures and deferred maintenance, as well as any other reserves that the homeowners’ association or the developer may be required to fund pursuant to any state, municipal, county, or other governmental statute or ordinance;
b. Operating expenses; or
c. Any other assessments related to the developer’s parcels for any period of time for which the developer has provided in the declaration that in lieu of paying any assessments imposed on any parcel owned by the developer, the developer need only pay the deficit, if any, in any fiscal year of the association, between the total amount of the assessments receivable from other members plus any other association income and the lesser of the budgeted or actual expenses incurred by the association during such fiscal year.
2. This paragraph applies to all homeowners’ associations existing on or created after July 1, 2021.
Source: Section 720.303, Florida Statutes (2026) — HOA records, reserves, and financial reporting, Florida Legislature, Online Sunshine.
Future major repairs and replacements
Under generally accepted accounting principles for common interest realty associations, the financial statements include information about estimates of future major repairs and replacements of common property. This information is presented as required supplementary information, outside the basic statements, and is not audited.
In an audit, the auditor applies limited procedures to required supplementary information and adds a paragraph about it to the report.
Sources
Primary sources, reviewed as of November 6, 2026. Laws change; confirm the current text before acting.
- Section 718.112, Florida Statutes (2026) — Bylaws, budgets, reserves, and SIRSFlorida Legislature, Online Sunshine
- Section 718.111, Florida Statutes (2026) — Condominium association records and financial reportingFlorida Legislature, Online Sunshine
- Section 720.303, Florida Statutes (2026) — HOA records, reserves, and financial reportingFlorida Legislature, Online Sunshine
- Rule 61B-22.006, Florida Administrative Code — Financial Reporting RequirementsFlorida Department of State
- Statements on Auditing Standards — currently effectiveAICPA & CIMA