California's Reserve Funding Disclosure Form, Line by Line

Quick Answer: Every California HOA must send owners a short form called the Assessment and Reserve Funding Disclosure Summary (Civil Code § 5570) with its annual budget report. For a calendar-year association, that package goes out between about October 2 and December 1, 2026. The form asks for the regular assessment, extra assessments already approved, whether projected reserves will cover the next 30 years (and what more is needed if not), the reserve fund’s percent funded at year end, five-year projections under two scenarios, and the interest and inflation rates behind them. The numbers come from the adopted budget, the reserve study, and management’s projection of year-end reserve cash. Two things to check: the percent funded must use the statute’s straight-line formula, which may not match your study’s headline figure, and the interest assumption can’t exceed the San Francisco Fed’s discount rate plus 2 points (6.00% as of early October 2026, for a calculation made on or after September 17; recheck after the Fed’s October 27 and 28 meeting). No 2026 bill changed the form.

Budget season is here, and with the 2027 budget comes a short form that looks simple and isn’t. Almost every blank pulls from a different document, and its percent funded may not match any number in your reserve study. Here is how to read it, and fill it out, one item at a time.

When it has to go out

Civil Code § 5300(a) says an association “shall distribute an annual budget report 30 to 90 days before the end of its fiscal year,” and that applies “Notwithstanding a contrary provision in the governing documents.” Your CC&Rs can’t move the window, but governing documents can require more in the report than the statute does (§ 5300(b)), so check yours for extra requirements.

For a calendar-year association, 90 days before December 31, 2026 is Friday, October 2, and 30 days before is Tuesday, December 1. We haven’t found a statute or case that settles whether those end dates themselves count, so leave a few days of margin and keep proof of mailing. Mail delivery is complete when the document goes into the mail (§ 4050(b)). Other fiscal years use the same math: a year ending June 30, 2027 means mailing between April 1 and May 31, 2027.

Two prep steps are easy to miss:

• Owner delivery preferences. Under § 4041(b)(1), the association must ask each owner for an annual delivery notice and enter the data into its records “at least 30 days before” the § 5300 disclosure. A November 16 mailing needs that done by October 17.
• The form goes with a summary, too. Whether you mail the full budget report or the summary § 5320 allows, the form must go with it (§ 5300(e)).

It’s the same form as last year. AB 2050 changes reserve study rules starting in 2032 but doesn’t touch the budget report or this form. Two bills that would have changed the budget report, SB 1238 (vetoed) and SB 1007 (which didn’t pass), never became law, and neither would have changed this form (see new California HOA laws for 2027). Until 2032, the three-year inspection and annual review rules stay as they are; then AB 2050 turns the annual review into an annual update. Our guide to California’s reserve study law covers both.

The reserve summary and the form are two different things

Two of the reserve disclosures in the budget package are easy to confuse. The reserve summary (§ 5565) is the detailed one. It must be printed in boldface and be “based only on assets held in cash or cash equivalents.” It lists each major component’s replacement cost, remaining life, and useful life; the cash reserves needed and actually set aside at fiscal year end; the second as a percentage of the first; and the per-unit deficiency (needed minus actual, divided by the number of units, or figured in a way that reflects the difference if assessments vary by unit size or type). Any funds from a construction defect award or settlement are reported as separate line items under cash reserves.

The disclosure summary form (§ 5570) is the short snapshot most owners actually read. Since both go out with the same budget report, their percent funded figures should match, or a footnote should explain why not.

The form, item by item

The form has a title line, seven numbered items, and a closing Note. Work from the official text on the Legislature’s site. At least one widely used online copy drops the title line and misprints a cross-reference in item (7); the official text points to “paragraph (4) of subdivision (b) of Section 5570.”

Item	What it asks	Where the number comes from
Title	“For the Fiscal Year Ending ___”	The budget year the report covers
(1)	Regular assessment, “$___ per ___”	The adopted budget
(2)	Extra assessments already approved	Board minutes, resolutions, member votes
(3)	Yes or no: enough reserves for 30 years?	The study’s 30-year projection at the contribution actually adopted
(4)	If no: what else is needed	The funding plan’s schedule of assessment changes
(5)	All major components are included	The study’s component list, checked against exclusions
(6)	Required amount, study date, projected cash, percent funded	The study or update, plus management’s year-end cash projection
(7)	Five-year projections, two scenarios	The study’s projection, re-run at the adopted contribution
Note	Before-tax interest rate, inflation rate	The study’s assumptions, within the interest cap

Item (1). Fill in both blanks. The “per ____” is the period (month or year); don’t leave it empty. If assessments vary by unit size or type, point to the page of the attached schedule. The statute lets you supplement the form “so long as the minimum information set out in subdivision (a) is provided” (§ 5570(b)(3)).

Item (2). Assessments the board or members have already approved, “regardless of the purpose,” with due date, amount per unit, purpose, and a total. Needs that aren’t approved yet don’t belong here. If you answer No to item (3), the reserve contributions still needed go in item (4). Separately, any special assessment the board expects to need for major components or reserves goes in the budget report statement § 5300(b)(5) requires, with its estimated amount, start date, and duration.

Items (3) and (4): the 30-year question. Item (3) asks whether “currently projected reserve account balances” will “be sufficient at the end of each year” to cover major component repair and replacement “during the next 30 years.” The statute defines neither “sufficient” nor what “currently projected” assumes, and we haven’t found a court decision that does. Item (4) asks for contributions “that have not yet been approved by the board or the members,” which suggests item (3) counts only approved funding, but some preparers answer assuming the adopted plan is followed and say so on the form. Either way, (3) and (4) should tell the same story; ask your attorney which reading to use.

Item (4)’s numbers usually come from the funding plan’s required “schedule of the date and amount of any change in regular or special assessments” (§ 5560(a)). If that plan aims higher than just never running short, such as full funding, its schedule may call for more than item (4) needs, so ask your preparer which figures the answer uses. If the board adopted a different contribution than the study recommended, re-run the projection at the adopted number first. And a “Yes” isn’t a promise of no special assessments; the form’s own Note says the estimates “are subject to change.”

Item (5). This is a statement, not a question: “All major components are included in the reserve study and are included in its calculations.” Check it before it goes out. Components with more than 30 years of remaining life can be left out if that’s disclosed in the study and on this form (§ 5570(b)(2)), and the funding plan can exclude components the board has decided won’t be replaced (§ 5550(b)(5)). For components the board has decided not to replace, the budget report must also say so and give the board’s justification (§ 5300(b)(4)). If anything was left out, our reading of the statute is that you should supplement or modify the line to say so rather than send an inaccurate statement. Confirm the wording with your attorney.

Item (6): this year’s percent funded. Four pieces:

1. The estimated amount required at the end of the current fiscal year, using the statutory formula (next section).
2. Who prepared the study or update, and when. This line tells owners how old the numbers are.
3. Projected reserve cash at year end, and percent funded (cash divided by the required amount). Management builds the cash figure from the latest reserve statements and the reconciliation the board reviews “on a monthly basis” (§ 5500), plus remaining contributions and interest, minus planned reserve spending. Use the same cash-only standard as the reserve summary: reserve money lent to the operating account and not yet repaid isn’t reserve cash, and neither are past-due assessments owners still owe.
4. An optional second figure if an “alternate, but generally accepted, method” is also used, with an attached explanation.

Item (7): five years, two scenarios. For “each of the next five budget years,” the form wants the required amount, then projected cash and percent funded twice: once “taking into account only assessments already approved and other known revenues,” and again “If the reserve funding plan approved by the association is implemented.” The statute prints one set of blanks, so preparers commonly attach two five-row tables. For owners, the gap between the two scenarios is the most useful thing on the form. If the board budgeted less than the plan calls for, this is where it shows. But the statute doesn’t say whether the first scenario carries this year’s approved contribution forward through all five years or counts nothing beyond what’s already approved. That choice can move the gap a lot, so say on the form which one you used. The form also doesn’t label the plan as full, threshold, or baseline funding; for the plan’s goal, look to the funding plan summary in the budget report (§ 5300(b)(3)) or the study itself.

The percent-funded formula trap

Section 5570(b)(4) says the amount needed for each component “shall be computed as the current cost of replacement or repair multiplied by the number of years the component has been in service divided by the useful life of the component.” It adds: “This shall not be construed to require the board to fund reserves in accordance with this calculation.” It’s a disclosure yardstick, not a funding requirement.

The budget report must include calculations using this formula even if your study uses another method (§ 5300(b)(7)). That’s why the form and the study can show different percent funded figures without either being wrong, and why percent funded from two different studies isn’t always an apples-to-apples comparison:

• Age. The statute counts years in service. Industry standards use effective age (useful life minus remaining life), which shifts when an inspector finds a component in better or worse shape than its age suggests. Whether “years in service” can mean effective age is unsettled, so ask your preparer which one the form uses and your attorney whether that reading is safe. Watch components still in use past their useful life: their years in service exceed the useful life, so the statutory amount comes out above the component’s full replacement cost.
• Formula. Some studies adjust for interest and inflation. An older Department of Real Estate guide (RE 25, 2010) shows one property at 61% funded straight-line and 65% adjusted. The adjusted figure belongs on the alternate-method line.
• Date. The form wants the end of the current fiscal year. A study prepared last year may report percent funded a year earlier.
• Cash and scope. The study’s starting balance was an earlier estimate, and excluded components shrink the required amount.

An illustration (hypothetical numbers, not a client): a 48-unit calendar-year association, as of December 31, 2026.

Component	Current cost	Useful life	Years in service	Statutory amount	Study amount (effective age)
Roof	$240,000	25	15	$144,000	$144,000
Asphalt overlay	$90,000	20	12	$54,000	$63,000 (worn early; effective age 14)
Exterior paint	$120,000	10	7	$84,000	$84,000
Pool resurface	$30,000	12	3	$7,500	$7,500
Total				$289,500	$298,500

Projected reserve cash: a $171,000 balance on September 30, plus $14,400 of October to December contributions, plus $1,200 of interest, minus $9,000 of planned spending, equals $177,600. The form shows $177,600 ÷ $289,500 = 61.3% funded. The study shows $177,600 ÷ $298,500 = 59.5%. With equal assessments for every unit, the reserve summary’s per-unit deficiency on the statutory basis is ($289,500 minus $177,600) ÷ 48 = $2,331.25.

Neither number is wrong, but owners who see both unexplained will ask. Put the reserve summary and item (6) on the same date and formula, and show the other figure on the alternate-method line. What the percentages say about your association’s health is covered in how much an HOA should have in reserves.

The interest rate cap

Section 5300(b)(7) says the reserve calculation “may not assume a rate of return on cash reserves in excess of 2 percent above the discount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made.”

The statute doesn’t say which discount window rate it means, but the Fed at times uses “discount rate” for its primary credit rate, and that’s the conventional reading. Current rates are published here.

Calculation made	SF Fed primary credit rate	Highest assumption allowed
September 17, 2026 onward (as of early October)	4.00%	6.00%
December 11, 2025 to September 16, 2026	3.75%	5.75%

The primary credit rate moves when the Fed moves rates, and the Fed meets October 27 and 28, in the middle of a calendar-year association’s mailing window. Its December 8 and 9 meeting comes after the December 1 deadline, so it matters only for fiscal years that end later. Since the test is the rate “at the time the calculation was made,” note the calculation date in your file.

The cap is a ceiling, not a target. In our view, a long-term assumption near 6% is aggressive for money held in insured accounts and short CDs (see investing HOA reserve funds). And the form wants the before-tax rate. Reserve interest is generally taxable to the association (the IRS instructions for Form 1120-H list sinking fund interest as income that isn’t exempt function income), so a study may model interest after tax. Report the before-tax figure anyway. Because the before-tax rate is the higher number, the cautious reading is that it, not the after-tax rate, has to stay within the cap. Take tax questions to your CPA.

Mistakes to check for

These come from the statute’s text, published sample forms, or practitioner articles:

1. An old template. Some published samples still carry wording the Legislature changed years ago.
2. Answering items (3) and (4) off the recommended contribution when the board adopted a different one.
3. One number in item (7) instead of five years, or only one scenario.
4. “Per ____” left blank in item (1).
5. An interest assumption above the cap.
6. A rewritten formula, such as adding an inflation multiplier, instead of the statutory one plus an alternate line.
7. Skipping the § 4041 data-entry step.

Other slips worth checking for, though no published source says how common they are: a stale study date in item (6), percent funded figures that differ between the form and the reserve summary with no footnote, the after-tax rate in the before-tax blank, an item (5) statement left standing when components were excluded, and a budget summary mailed without the form.

It matters beyond the mailing. Under § 5605(a), an annual regular assessment increase requires either member approval or compliance with paragraphs (1), (2), (4), (5), (6), (7), and (8) of § 5300(b), which include the reserve summary, the deferral statement, and the reserve calculation statement with its interest cap. Whether a mistake on the form alone puts an increase at risk is unsettled; ask your attorney. Sellers also hand these documents to buyers (§ 4525(a)(3)).

Where we come in

The form is only as current as the study behind it. Item (6) prints the study date on the page, and items (3), (4), and (7) depend on a 30-year projection run at the contribution your board adopted. If your numbers are a year or two old, an annual reserve study update without a site visit refreshes costs, the starting balance, and the projection before the budget goes out. If you’re due for the three-year inspection, start with a full reserve study.

We prepare reserve studies and updates; we don’t give legal advice, and your manager and attorney should review the finished form. If you want your form’s figures checked against the statutory formula, contact Apex Reserve Group before your budget meeting.

This article describes California law in general terms as of October 2026. It is not legal or tax advice. Your association’s attorney should advise on how the law applies to your community, and your CPA on tax questions.