Accounting for HOA reserve funds involves the following steps:

1. A separate bank account must be opened. This account can be at the same bank as the operating account, but it must be separate. Reserve accounts require the signature of two board members to withdraw funds. The management company for an HOA may not sign checks or withdraw funds from a reserve account per the Davis-Stirling Act.
2. The balance of the reserve account should always be adequate to cover all anticipated reserve expenditures described in a current reserve study. The reserve study report must be updated at least every three years. This is a minimum requirement per the Davis-Stirling Act.
3. In addition to the reserve study, reserve contributions must take into consideration the fact that nearly every mortgage lender will require reserve contributions into the reserve account of not less than 10% of the total association budget unless the latest reserve study report justifies a lower amount.
4.  At the end of each fiscal year, which is December 31 for most associations, the operating account should show reserve transfers to the reserve account equal to the amount required by the reserve study, or 10% of the budget as described above.
5. At the end of each fiscal year, the reserve account should show deposits from the operating account into the reserve account equal to the amount required by the reserve study or 10% of the budget as described above less all reserve expenditures. There should be a year-end cash balance in the reserve account that can be reconciled to the cash flow report in the reserve study.

For additional information see: Calculating Minimum Reserve Contributions.