HOA Money · Colorado
An HOA’s operating fund pays for this year’s bills. The reserve fund saves for big replacements years from now, like a roof or boiler. Keeping them in separate accounts, and funding reserves every month, is the simplest way to avoid surprise special assessments.
Two pots, two jobs
Operating fund: this year’s bills. Insurance, snow removal, landscaping, utilities, management, accounting, small repairs.
Reserve fund: future replacements. Roofs, siding, decks, boilers, paving, elevators, hot tubs.
The operating fund should end the year close to even. The reserve fund should grow steadily until a project comes due.
Why keeping them separate matters
- Owners can see the truth. Mixed accounts hide whether dues cover the year.
- Reserves don’t get spent by accident on a big snow year or an insurance jump.
- Buyers and lenders look at reserves when a unit sells or refinances.
- Special assessments are less likely when reserves are funded and protected.
What Colorado requires
- A reserve study policy: when studies are done, whether there’s a funding plan and whether the study includes a physical analysis (C.R.S. 38-33.3-209.5).
- A policy on investing reserve funds.
- Board members investing reserves are held to the standard in the Colorado nonprofit act (C.R.S. 38-33.3-303(2.5)).
- For new communities, a 2026 law requires the developer to fund a reserve study before handing control to owners. See our Colorado HOA reserves page.
The state’s HOA Center notes that the use of reserves is generally up to the board unless the documents require owner approval (DRE, 2025).
Mountain examples
- Operating: a heavy snow year in Breckenridge blows the plowing budget. That’s an operating overrun, covered by the operating cushion or next year’s dues, not reserves.
- Reserve: a 25-year-old roof in Dillon needs replacing. That’s exactly what reserves are for.
How it should look on the books
- A separate reserve bank account, not just a line on a spreadsheet
- Monthly transfers from operating to reserves, as budgeted
- A balance sheet that shows operating and reserve balances on their own
- Interest earned on reserves kept in reserves
- Any loan from reserves to operating written down, with a payback plan
We set up and track operating and reserve funds for the associations we work with. See our HOA accounting services and pricing.
How much should be in reserves?
There’s no single right number. A reserve study lists each major component, its remaining life and its replacement cost, then builds a funding plan. Boards often look at “percent funded,” which compares the reserve balance to what the study says should be saved by now.
- Higher percent funded: lower risk of a special assessment.
- Lower percent funded: higher risk, especially for older buildings.
Update the study every few years, and after any major project, so the plan stays real.
Common mistakes
- Skipping reserve transfers in a tight year
- Paying routine repairs from reserves
- Keeping reserves in the operating account
- Budgeting reserves as “whatever’s left”
- Never updating the reserve study
Each one makes a future special assessment more likely. See our special assessments guide.
Questions for your next budget meeting
- Is the reserve transfer in the budget the same as the reserve study’s funding plan?
- When was the reserve study last updated?
- What are the next three big projects, and when are they due?
- Does the operating fund have a cushion for a big snow year?
- Have we borrowed from reserves, and is there a payback plan?
If the answers aren’t clear, the board doesn’t yet have a full picture of the association’s money.
This is accounting education, not legal or tax advice.
FAQ
What is the difference between operating and reserve funds?
The operating fund pays for the normal year, like insurance, snow removal and utilities. The reserve fund saves for big, predictable replacements, like a roof or boiler, that happen every 10 to 40 years.
Does Colorado require HOAs to have reserves?
Colorado doesn’t set a minimum reserve amount for most associations. CCIOA does require a reserve study policy and a policy on investing reserve funds, and a 2026 law requires developers to fund a reserve study before turning over control.
Can the board use reserve money for operating bills?
Generally the use of reserves is up to the board unless the governing documents require owner approval, but the board must act in good faith and with ordinary care. Borrowing from reserves should be documented and paid back on a plan.
How much should go into reserves each month?
The reserve study’s funding plan sets the target. Without a study, the board is guessing.
Want your funds tracked the right way?
We’re a local Frisco, Colorado accounting firm for HOAs, condo associations and property managers. A real person is one call away, and we reply within one business day.
HOA accounting starts at $200/month. No long-term contract.
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