Recommendations for funding models are based on current known economic, component and financials variables. Projections in the reserve study are educated guesses and are based on many assumptions. Predicting the future is not easy or necessarily accurate so we  give little consideration/weight to projections in our reserve studies. 

Estimating project costs in the reserve study is an important step to developing funding models in the reserve study. How do we determine costs and what sources are utilized? 

A community can underfund a reserve account for years or decades before the true financial situation arises and often with little in the way of negative consequences.  

The estimated useful lives of components in the reserve study are based on our experiences working with many communities in the past and backed up by many useful life manuals published by very credible sources. 

Siding is unsurprisingly one of the most important components a building possesses as it provides protection from the elements. Unfortunately, it is also one of the components that is most often not adequately budgeted for or maintained. 

The funding models in a reserve study should take into account fairness to the community members over the life of the community. By Fairness we mean to distribute the costs as evenly as possible so everyone pays their fair share for the use of the common area components.  

Inflation happens to everyone and everywhere, sure there are periods of time when inflation stalls are even declines but overall it has risen in the United States for well over 100 years. There are many different indices that track inflation in the United States and none, that we have found, indicate a prolonged period of flat or declines in the overall inflation rate. With respects to reserve studies we want to track what is most reliable to the end consumer which is often a Condominium/HOA/AOAO Association, Non Profit Organization, Commercial Building Owner, Hotel, Apartment, etc.

Adequately budgeting for reserves is often one of the more difficult tasks our Clients face. Reserve component projects are infrequent and often years down the line, making it very easy to just “deal with it later”.  We have found those that are most successful with reserve budgeting goals typically follow some simple rules. We call it goal setting the ACE way.

The Percent Funded calculation in the reserve study is a measurement of the adequately of the reserve account balance when compared to an idealized amount in the reserve account. This measurement helps a reader of the reserve study come to a conclusion as to the overall health and degree of risk the reserve account balance is currently at. Is there a high risk for reliance on emergency financing and/or deferring projects?  This video goes into the calculation and risk factors at different level of Percent Funded.

The Fully Funded Balance is an important calculation in determining whether the reserve account is adequately funded for future project expenditures. It is essentially an ideal amount that a reserve account would be funded so that the reserve account remains on track for long term expenses that will occur over time. This video delves into the calculation of the Fully Funded Balance.