What is Unappropriated Members’ Equity?

Unappropriated Members’ Equity (also known as Prior Year Owners’ Equity, Excess Operating Funds, or Operating Reserves) represents the Association’s net income or loss since inception. It is like a retained earnings account for a regular business. It provides a cushion for operations and protects replacement reserves. If the Association has unanticipated operating expenses that exceed the annual budget, this net loss can be funded from Unappropriated Members’ Equity instead of replacement reserves.