What is the Reserve Account Balance?
This is the amount in the reserve account. This could be the actual bank account balance as of a particular date, a projected balance as of any particular date in the study or an estimated amount based on a mix of bank account and investment account balances. Typically a reserve analyst will request the reserve account balance from the Client as a starting point to determine what level the Association is currently funded at. From this beginning reserve account balance the reserve analyst is able to develop a catered financial strategy – providing recommendations with respects to future reserve allocation rates (amount to be placed in the reserve account).
The reserve account balance is an important number from which the reserve analyst will start the financial analysis in the reserve study. Taking this Client supplied number and adding in interest, taxes, expenditures, inflation, etc., to develop a long term financial plan that is realistic and catered to the Associations long term goals.
As the financial analysis is developed the reserve analyst is able to determine how the reserve account balance is impacted – a financial strategy that results in a negative balance within the study timeframe is not going to be adequate or advised. The reserve analyst will develop financial strategies that results in a reserve account balance that will place the Association on a fiscally responsible path for the life of the study. This can be difficult if an Association is extremely underfunded (has a reserve account balance well below the “ideal” Fully Funded Balance). Note that this reserve account balance will see very large fluctuations as large community projects like landscaping roof, siding, windows, asphalt, and pools are replaced /repaired / refurbished and result in large expenses to the Association.