As we approach October, we are now officially into budget season. Associations are working hard to develop next year’s budget and doing everything possible to keep assessments from rising. Association Managers are calling vendors and utility companies to get an idea of next year’s rates and fees. In addition to the regular operating budget, associations […] read more »
Category Archives: Financial Analysis
As mentioned the article “What is Percent Funded?” we learn that we can use the percent funded as a way to measure the strength of the Reserve Fund. The strength can be described as weak, fair, strong and ideal. Below are a few general benchmarks that may be used. 0-30% Funded is a “weak” status. […] read more »
Step 1: Board Meeting The Board of Directors has the responsibility to do what is in the best interest of the Association and has significant influence; therefore, the first step is for the Board to meet. This meeting should discuss the results of the reserve study. Invite the Association Manager to attend. The purpose of […] read more »
Percent funded is one of the methods to measure the strength of a Reserve Fund. The Community Associations Institute (CAI) defines “Percent Funded” as the ratio, at a particular point in time (typically the beginning of the Fiscal Year), of the actual (or projected) Reserve Balance to the Fully Funded Balance, expressed as a percentage. […] read more »
Funding Methods Funding Methods are ways to determine how much the Reserve Contribution Rate and what the corresponding Reserve Fund Balance should be. There are two methods of calculating the results of the financial analysis. The first is the Straight Line or Component Funding Method & the second is the Cash Flow Method. The Straight […] read more »
There are essentially three ways to contribute to your reserve account. Regular Contributions, Special Assessments and Loans. Regular Contributions are the best method of funding the reserve account. If adequate regular contributions are not established the reserve fund will eventually be underfunded. An underfunded reserve account leads to deferred maintenance and potentially extensive repair. The […] read more »
Level I: Full Reserve Study. This is the most labor intensive Reserve Study. It includes both a Physical and Financial Analysis. The Component Inventory list and current component Condition Assessments with Life and Valuation estimates are determined from a visual on-site inspection. This information is used to conduct the Financial Analysis which includes the current […] read more »
We are often asked about what the different terms within a reserve study mean. Here is a list of some of the most common terms and definitions. Cash Flow Method A method of developing a Reserve Funding Plan where contributions to the Reserve fund are designed to offset the variable annual expenditures from the […] read more »
In general terms a Reserve Study is a long term plan that indicates how much money needs to be set aside to pay for future expenses. Let’s say you live in a condominium, you share common assets such as roofs, siding, pools, cabanas, asphalt, parks, etc. These assets have maintenance and/or replacement expenses that can […] read more »