Accounting guide
Condominium cash fund and reserve fund
Many condominium owners confuse the cash fund with the reserve fund, but they serve different purposes. The cash fund covers day to day liquidity so the manager can pay utilities and suppliers without waiting for every installment to be collected. The reserve fund, instead, accumulates resources over time for predictable future expenses, such as major works or plant replacement. Both must be approved by the assembly with the majority required under article 1136 of the Italian Civil Code, and both must appear clearly in the annual financial statement, with traceable balances kept separate from ordinary management fees. Managing these funds correctly reduces the risk of sudden arrears and makes the manager's work more transparent toward unit owners.
Cash fund: liquidity for daily management
The cash fund is a pool of immediate liquidity that lets the manager cover ordinary expenses, such as utilities or small maintenance jobs, without waiting for every owner's installment to be collected. It is not a reserve for future major works, but an operating buffer that prevents delays in paying suppliers or meeting tax deadlines.
The assembly sets the cash fund amount, usually when approving the annual budget, either as a percentage of the ordinary management budget or as a fixed sum considered adequate for the size of the building. It must be held in a dedicated condominium bank account, as required by article 1129 of the Civil Code, so that condominium transactions always stay separate from the manager's personal funds.
Reserve fund: setting money aside for major works
The reserve fund follows a different logic: sums are set aside over time, through periodic contributions approved by the assembly, to cover predictable major works such as facade renovation, elevator replacement, or interventions on shared systems. Building up a reserve fund avoids having to ask owners for a large lump sum contribution on short notice.
Article 1135 of the Civil Code gives the assembly the power to approve extraordinary maintenance works and the related set asides; for extraordinary maintenance works of significant amount, article 1135 also requires the mandatory creation of a special fund equal to the cost of the works, to be paid before work begins. A reserve fund fed with regular contributions reduces the need for these last minute special funds.
How the assembly approves the funds
The resolution establishing or feeding a cash fund or reserve fund requires the majority of attendees representing at least half the value of the building, under the ordinary quorum rules of article 1136 of the Civil Code. The proposal must be clearly listed on the agenda, stating the amount, the payment terms, and the purpose of the set aside, to avoid grounds for challenging the resolution.
It is good practice to link the reserve fund amount to a multi year maintenance plan, so that owners see a direct connection between what they pay and the works scheduled for the building, rather than perceiving the contribution as a generic request.
How to record them in the financial statement
In the annual statement, prepared according to the clarity and transparency criteria required by article 1130 bis of the Civil Code, the cash fund and the reserve fund must appear as separate line items from ordinary management expenses, showing the opening balance, the contributions received during the year, the amounts used, and the closing balance.
An unclear presentation of these balances is one of the most frequent reasons owners challenge the financial statement: keeping cash movements clearly separate from reserve contributions, with precise references to supporting documents, reduces disputes and also simplifies any review by the board of auditors, where one has been appointed.
Frequently asked questions
What is the difference between the cash fund and the reserve fund?
The cash fund is a pool of current liquidity used to pay ordinary expenses without waiting for installments to be collected, while the reserve fund is a set aside built up over time for future major works, such as building renovations or plant replacement. They serve different purposes and must be kept distinct in the accounts, with separate balances shown in the financial statement.
Is the reserve fund mandatory by law?
The Civil Code does not impose a generic reserve fund as an automatic obligation for every condominium, but article 1135 makes it mandatory to create a special fund for extraordinary maintenance works of significant amount, before the works begin. An ordinary reserve fund, fed with periodic contributions, is instead a choice the assembly can approve to plan future expenses more effectively.
What majority is required to approve a cash fund or reserve fund?
The ordinary majorities set out in article 1136 of the Civil Code apply: on first call, a favorable vote is needed from the majority of attendees representing at least half the value of the building. The proposal must be clearly stated on the agenda, including the amount and the purpose of the set aside.
What happens if an owner does not pay their share of the reserve fund?
Failure to contribute to the reserve fund constitutes arrears in the same way as ordinary management fees: the manager can pursue debt recovery, including the payment order under article 63 of the implementing provisions of the Civil Code. Keeping fund balances clearly tracked in the financial statement helps document precisely the amount owed by each unit owner.
How can the cash fund and reserve fund be tracked without errors in the statement?
Accounting needs to keep cash movements clearly separate from reserve contributions, with opening balances, payments received, and amounts used always linked to supporting documents. Management software such as AmministraPro allows these funds to be recorded as distinct line items in the financial statement, with contributions traceable owner by owner, reducing the risk of errors and disputes during the assembly.
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