a. Fiscal Year - The actual study begins in the fiscal year indicated in Part 1 of the Reserve Disclose Page but also lists the year the site inspection has taken place.
b. Fiscal Year Start Balance - This expected starting Reserve Balance is provided by the Board
c. Interest Earned - Based on the annual % assumption listed in the Reserve Disclosures and applied to the expected Reserve Balance (based on recommended allocation rate) in the years covered in this Reserve Study.
d. Reserve Allocation Rate (based on the funding strategy used –e.g., Threshold, Statutory, Baseline) - This is the recommended allocation rate based on the funding strategy used and increased annually to keep up with inflation.
e. Allocation Increase Rate - The % the allocation rate is increased annually; typically in line with inflation estimates. Note that there may be a large increase initially from the current allocation rate. This is typical of many Associations which are poorly funded and need to implement substantial increases to their allocation rate in order to meet expenditure cost estimates.
f. Special Assessments - Typically will be provided by the Board if any are planned. Rarely will we recommend a special assessment. If there are special assessments, comments in the Preface of this Study as well as the Component Details section will go into detail as to what they will cover.
g. Disbursements - The estimated total accumulative expenditures for replacement/repair of common area components included in this study in any given year.
h. Fiscal Year-End Balance - The expected year-end balance in the reserve account after the reserve allocation amount, disbursements, interest and special assessments are taken into account. This is based on the reserve allocation recommended by your Reserve Analysts.
i. Fully Funded Balance - This is the ideal 100% funded balance in any given year. Note that this is not an amount the equals the total replacement costs of the components but equals an amount which offsets the depreciation to those common area components in any particular year. A reserve balance equal to this amount indicates the Association is well prepared for future expenditures and would be 100% fully funded. Note that this balance increases and decreases over time, taking into account replacement/repair of common area components over time as well as inflation of costs and interest earned on account balances.
j. Percent Funded – The percent funded the community is based on the expected reserve balance as of the fiscal year start date noted in this study. The recommended allocation amount is then applied to the expected reserve balance and increased annual thereafter at the allocation increase rate. Over time the Percent Funded will increase at a rate that is line with the Funding Strategy (typically 100% funded within 30 years unless otherwise noted).
4. Yearly Review Chart
The Yearly Review Chart is based on the recommended thirty year projections and data outlined in the Cash Flow Analysis. This chart is an excellent visualization of the data for the fiscal year end balances versus disbursement and the overall percent funded based on the recommended allocation rate over the thirty years covered in this reserve study. Additionally the Baseline Funding Plan (keeps the reserve account above a $0 mark) and corresponding Percent Funded for this funding strategy is included per statutory requirements. The Current Funding Plan and corresponding Percent Funded are included when possible to show the long term impact of following the current funding strategy. Note that often this current funding plan will fall to zero within the 30 years covered in this study.
5. Category Breakdown Chart
The Category Breakdown Chart shows the allocation percentage of the recommended allocation rate each Category encompasses. This is also a good visual to see where most of the Association’s reserve funds are expected to be implemented in the coming years. Typically one or two categories will have a large percentage of the total recommended allocation.
6. Disbursement by Year
The Disbursement by Year section of the report details the estimated disbursement, by year, for each component over the 30 years covered in the reserve study. These disbursement amounts are based on actual estimated cost to repair/replace the common area components in any particular year. Note that these are inflated costs and not current costs as inflation increases the expected costs over time. A review of this section of the study on an annual basis is recommended to adequately prepare for expected expenditures in the current or upcoming years. The total provided at the end of this section is the total expenditures of all included common area components over the 30 years covered in this study. Note that this amount is much higher than the Total Current Costs as it is the accumulative costs of the expected disbursements over the 30 years covered in this study.
7. Reserve Balance Distribution
The Reserve Balance Distribution section outlines the amount allocated, from the current “fiscal year start balance” to each reserve component, categorized by their respective categories. Depending on the current “percent funded” amount there may not be enough to allocate money to all of the components, in which case the items with the shortest remaining useful life will be funded for first and those with a longer remaining useful life, may not be funded for at all in this first year. The percent allocated from the current “fiscal year start balance” has also been provided for each component that is being funded for. Please note that with an ideal 100% percent funded reserve balance all components would be funded for in this section of the report.
8. Allocation Breakdown
The Allocation Breakdown section outlines the amount allocated to each component, categorized by their respective categories (alphabetically), from the “Recommended Reserve Allocation Rate”. This reserve allocation rate is broken down to per year, per month and per unit per month for each reserve component. The percent allocated from the totally allocation rate is also provided for each component.
9. Fully Funded Balance Breakdown - Next Fiscal Year
The Fully Funded Balance Breakdown section shows each component in their respective categories (alphabetically) with current costs, useful life, remaining useful life and the fully funded balance for each reserve component. The “Fully Funded Balance” for each component is based on an ideal 100% funded reserve balance. These reserve components are then totaled to show the total cost for all reserve components as well as the fully funded balance for the next fiscal year. Note that the total costs of the components in this section of the report are slightly higher than the total of the Current Costs in the Reserve Disclosures – Part 2 of this study. This can be attributed to this section of the study for the next fiscal year and subject to inflation over this period of time.
10. Category Summary – Next Fiscal Year
The Category Summary section breaks down the current total cost and the fully funded balance for each category (sum of reserve components) for the next fiscal year. The useful life and remaining useful life minimum and maximum has also been provided; based on the reserve components in each category.
11. Component Details
The Component Details section details each component with pictures (when available), comments, quantity, unit of measure, unit cost, source code (reference to where cost and/or useful life was obtained), the percent of the component being repaired/replaced, contingency percentage and the extended costs (total estimated future cost of the reserve component). Additionally, when applicable, component specific comments on the condition rating and maintenance of the component are included.
12. Field Report
The Field Report section provides some general comments and advice on care and maintenance of typical reserve components that are large expense items for common interest communities. Following maintenance recommendations will typically lead to longer useful life’s of components and higher aesthetic appeal in the community.
This section of the study covers assumptions, calculations, definitions, and disclosures in developing our opinion for a funding strategy we have recommended for your community. Referring to this section for industry specific terms and calculations helps a reader to better understand the methods, finding s and overall strategy we are recommending. [TOP]